The performance of the copper futures markets in March exceeded expectations. In the first half of the month, copper contract prices rose on the back of the decline in the US dollar and the positive information from the Two Sessions (National People's Congress and Chinese People's Political Consultative Conference) in China. Copper prices rose further in the middle of the month thanks to expectations over production cuts by smelters after the meeting of Chinese smelters, even as the recent strong US employment data and no sign of inflation falling bolstered the US dollar. The US dollar in March declined before rising. The European Central Bank indicated that it may start cutting interest rates in June after eurozone inflation is under control, and the euro against the US dollar fell in late March. During the month, the Bank of Japan finally emerged from the era of negative interest rates. But as this had been priced in and the Bank of Japan's subsequent attitude was not hawkish, the yen continued to fall.
In the Chinese market, in addition to the positive macroeconomic factors in March, the Chinese smelters held a meeting in Beijing on March 13, which proposed production cuts. This news pulled LME copper price up to $9,000/mt. SHFE copper prices jumped in the night session and broke through the 70,000 yuan/mt mark before continuing to rise. Copper contract prices rolled back some gains in late March, and stopped falling and hit a new high after the China Smelters Purchase Team (CSPT) proposed "joint production cuts" again at its latest meeting. However, the weak fundamental did not changed. The remarkable rise in copper prices which deviated from the fundamentals made downstream companies more cautious.
In April, the tight ore supply has not improved, and copper inventories continued to accumulate to a high level. Copper prices rose and high copper prices have led to weak consumption. While smelters have undertaken concentrated maintenance in April, according to SMM survey, the estimated impact on copper cathode output in April from maintenance is lower than expected. The impact from ore supply tightness may be more significant in May and June. The Shanghai Futures Exchange (SHFE) will impose trading limits on its gold and copper contracts from April 12. This may to some extent curb the frenzy of funds driving the purchase of copper and gold. Inventories may begin to fall in the second quarter of the year. LME copper is expected to trade between $9,250-9,650/mt this month and the most active SHFE copper contract prices will fluctuate between 74,000-78,000 yuan/mt.
