SMM Copper Morning Comment

LME copper prices opened at $8300.5/mt overnight before reaching a low of $8290.5/mt and a high of $8358/mt, and closed at $8339/mt, a drop of 0.04%. Trading volumes were 16,000 lots and open interest stood at 286,000 lots. The most active SHFE 2401 copper contract prices opened at 67700 yuan/mt and finished at 67820 yuan/mt last evening, down 0.1%, with the low-end of 67690 yuan/mt fell high-end of 68090 yuan/mt. Trading volume was 17,000 lots, and open interest stood at 143,000 lots. On the macro front, the Federal Reserve kept interest rates unchanged, acknowledging that the economy and inflation have slowed, and the dot plot suggests that it will cut interest rates three times next year. Federal Reserve Chairman Jerome Powell said he believes policy rates have reached or are close to their peak, and interest rate cuts are beginning to come into view. Domestically, M2 grew by 10% year-on-year at the end of November, and the growth rate was 0.3 percentage points and 2.4 percentage points lower than the end of last month and the same period last year respectively. In terms of fundamentals, the market price moved down yesterday, and the enthusiasm for downstream purchasing in East China has recovered. However, as the price spread between front-month and next-month contracts was still widening, the market still remained cautious before delivery; the outbound volume in South China increased slightly, but downstream buyers still pushed for lower prices. Cargo merchants were unwilling to give up profits, and the stalemate between the two sides resulted in low trading volume. In terms of consumption, most downstream companies said that copper prices have fallen and downstream orders will increase to a certain extent. However, the increase will be limited due to the high price spread between front-month and next-month contracts. It is expected that demand will pick up after the delivery. Due to the influence of macro sentiment, copper prices will have limited downside room in the near future.