With unresolved geopolitical tensions, copper futures still face significant resistance

Macro side, this week saw significant fluctuations in US manufacturing activity, causing market concerns. The New York Fed's manufacturing index for October plummeted to -11.9. Several US Fed officials remained cautious about future interest rate cuts in their speeches. Due to the worsening geopolitical situation in the Middle East and between North and South Korea, gold prices hit a new historical high. Meanwhile, the US dollar index continued to rise during the week, peaking at 103.87 mid-week. The 10-year US Treasury yield remained stable at 4.0%-4.1%. In China, the Ministry of Finance announced a package of targeted growth policies last weekend to stabilize the real estate market, reduce operational risks for commercial banks, support local governments in debt resolution, and improve the leverage process for both residents and the government. During the week, copper futures were pressured downward by the rising US dollar. LME copper fell to around $9,500-$9,600/mt; SHFE copper fluctuated around 76,000-77,000 yuan/mt.

Fundamentals side, the raw material shortage for domestic smelters eased, with the spot TC index for copper concentrate returning to above $10/mt. For copper cathode, due to the concentrated arrival of imported copper in October, holders in the imported copper market in the Shanghai bonded zone were actively selling. However, due to the unfavorable SHFE/LME price ratio, the transaction center was under downward pressure. In domestic trade, the continuous inflow of imported copper led to an accumulation in domestic social inventory. With weak end-use consumption, SHFE copper turned to a contango structure again, and spot premiums declined. Looking ahead to next week, multiple countries will release preliminary October PMI figures. After the global interest rate cut cycle begins, these leading economic indicators may provide guidance on the future interest rate cut paths of various countries. In China, the new one-year LPR is expected to be lowered, and with the support of RRR cuts and interest rate cuts, the domestic economy is expected to continue improving in the fourth quarter. However, with unresolved geopolitical tensions, copper futures still face significant resistance. LME copper is expected to operate in the range of $9,400-$9,750/mt, and SHFE copper in the range of 74,500-77,500 yuan/mt. In the spot market, the consumption structure may repeat the trend of H1 2024, but with the decline in copper prices, end-use orders are expected to pick up, supporting spot premiums. Spot prices against the SHFE copper 2411 contract are expected to range from a discount of 100 yuan/mt to parity.