Lingering Woes over Financial Risks Will Undermine Impetus for Copper Prices to Rise

LME copper prices closed at $8,580/mt last Friday evening, a rise of 0.53%. Trading volumes were 18,000 lots and open interest stood at 253,000 lots. The most active SHFE 2306 copper contract ended at 66,960 yuan/mt last Friday evening, up 0.56%. Trading volume was 49,000 lots, and open interest stood at 183,000 lots. On the macro front, the stronger-than-expected U.S. employment data and wage growth rate hit expectations of the Federal Reserve’s interest rate cut. The labour market remains strong. Since the collapse of the third bank in the United States, the financial market has become more worried, and the market is concerned about the pressure on risky assets going forward.

In terms of fundamentals, as of Friday May 5, copper stocks in Chinese markets tracked by SMM increased 4,600 mt from two Fridays ago to 168,100 mt. The current total inventory decreased 28,500 mt from before the Chinese New Year holidays and are 48,100 mt higher than the same period last year.

After the Labour Day holidays, only Shanghai saw destocking, and while inventories increased across other regions. There was not a large volume of customs clearance of imported copper in Shanghai after the holiday, and some downstream buyers restocked inventories, driving lower local copper stocks. In other regions, due to insufficient demand during the holidays, smelters redirected cargoes to warehouses. That, combined with sluggish downstream purchasing, led to an increase in inventories. Although the US economy is still resilient, weak domestic demand will undermine the upward momentum for copper prices to rise. The market needs to pay attention to whether the subsequent financial market will hit copper prices.

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