SHANGHAI, Jul 20 (SMM) – LME copper fell below $6,000/mt, a psychologically-significant level, on Thursday as bearish sentiment from macroeconomic developments overcame the market, SMM believed.
The dollar index notched a new high within this year at 95.557 on Thursday while the yuan depreciated further, with onshore yuan at 6.7734 per dollar and broke 6.8 this morning. Concerns over the US-China trade disputes and fears of a Chinese economic slowdown continued to weigh on market sentiment.
While the operating rate across Chinesemanufacturers of copper products is expected to dip in July amid a seasonal lull, downstream consumption showed stable performance. Trading in the physical market was brisk this week as traders were keen to purchase while sellers held their offers firm in a closed import arbitrage window. Spot prices in Shanghai flipped into premiums on Thursday and were offered at premiums of 10-50 yuan/mt this morning.
In July, manufacturers of copper products are expected to operate at 82.16%, down 0.24 percentage point from June but up 9.98 percentage points from the same period last year.
Separately, the union for Chile’s Escondida copper mine last week rejected a contract offer by the company and threatened to strike unless changes were made.
We expect LME copper prices to remain weak in the short term as bearish sentiment on macroeconomics overshadows stable fundamentals. Developments in the labour negotiation at Escondida copper mine will be a key factor.
