Expectations over production cuts supported copper prices

The US dollar strengthened in the week ending March 29, running above the 5-day moving average; that weighed on copper prices early in the week. LME copper prices met resistance from the 10-day moving average. On Tuesday, the most active SHFE copper contract also met resistance from the 10-day moving average. Federal Reserve Governor Waller said that high inflation data and strong employment growth in early 2024 strengthened his view that there is "no rush" to cut interest rates; the dollar once again exceeded 104.5. Inflation in the UK is highly sticky, and the interest rate cut time may be later than that in the United States. However, the European Central Bank said that the growth of consumer prices is slowing rapidly and the time for interest rate cuts is coming; the euro against the dollar fell to a near 5-week low. On Wednesday, the US dollar was close to 152 against the yen. The yen depreciated, hitting a 34-year low.

In the Chinese market, A-shares gave up their early gains at the beginning of the week and hit the 3,000 mark. With the emergence of rumours of "Chinese version of quantitative easing" and the confirmation of "Central Huijin's large-scale purchase of ETFs on October 23, 2023", A-shares rebounded on Thursday. Despite bearish macroeconomic sentiment at the beginning of the week, the joint production cuts advocated by China Smelters Purchase Team (CSPT) on Thursday and the improvement of market sentiment prevented the decline of copper futures prices. On March 28, the CSPT reached 5 consensuses at the first-quarter general manager office meeting held in Shanghai; its initiative of joint production reductions has once again attracted market attention. At the end of March, some smelters have also begun maintenance plans, and copper cathode output will be affected. However, against the backdrop of nearly 400,000 mt of copper cathode inventory in China, spot trading is still under pressure. Downstream buyers have no strong purchasing sentiment against the high copper prices. The contango structure of SHFE copper contracts has not improved significantly.

In the week of April 1, many markets will close on Monday, and China will usher in the Qingming Festival holiday. Many key economic indicators including PMIs from many countries, US employment data and the eurozone CPI will be issued. LME copper is expected to trade between $8,750-9,000/mt and SHFE copper prices will fluctuate between 71,500-73,000 yuan/mt. In China’s domestic spot markets, stockpiling for the Qingming Festival will narrow spot discounts. It is expected that the discounts will be 180-80 yuan/mt.