SHANGHAI, Dec 2 (SMM)—As the US presidential election has finally settled, market participants expect larger fiscal stimulus measures from the Biden administration and a solid economic recovery from the coronavirus pandemic amid a slew of positive virus vaccine news.
Amid these upbeat news, copper prices surged in November, recording the largest monthly rise since November 2016. LME copper jumped $929.5/mt or 13.85% in the month, while the SHFE copper index surged 6,686 yuan/mt or 13.11%.
Could the copper prices extend its strength to December? The probability of SHFE copper rising in December is 42%, while that of LME copper is 56%. SHFE copper is more likely to decline in December on rising copper supply and weaker downstream consumption, SMM believes.
China’s copper cathode output is likely to rise further in December. TCs and RCs have gradually increased recently as copper concentrate supply rose. Newly started capacities have yielded output. Only several copper smelters will conduct maintenance in December, while most of the smelters are expected to step up production to fulfill their annual production targets.
Copper downstream consumption is likely to weaken in December. Operating rates at wire and cable producers are expected to drop 2.15 percentage points to 94.68% in December, SMM assessed. The construction and electronics sectors see sharp falls in their new-orders sub-indexes, while the transportation sector perform best thanks to the year-end peak season and supportive new polices issued by the state. The home appliance sector, the second best performer, see its export orders continue to grow.
In addition, inflow of imported copper cathode and copper scrap in December also deserves our attention. Copper cathode imports are likely to fall slightly on the month in December, SMM estimates, as many enterprises have already finished their annual import targets in November when the import arbitrage window opened for a short time. By contrast, imports of copper scrap are expected to grow significantly in late December, as importers have stockpiled large amounts of copper scrap from overseas markets after the new secondary copper import policy was implemented from November 1.
Overall, SMM estimates that copper prices are likely to weaken in December as its supply will exceed demand.