New US infrastructure plan to boost market confidence

SHANGHAI, Apr 7 (SMM)—The US economic data was upbeat last week, with new orders growing strongly. The manufacturing PMI stood at 64.7, the highest since 1983, and ADP non-farm payrolls stood at the highest since September 2020. The US dollar index stood at a high of around 93.4. Investors were away from market on Friday due to the Qing Ming Festival Holiday.  Upbeat PMI in China boosted bulls confidence, bolstering Chinese stocks and commodities.

The follow-up new infrastructure plan in the United States became the latest bait of the bulls. US President Biden officially announced last Thursday a stimulus package of over $2 trillion, aiming at optimising the development of US infrastructure and manufacturing industry. The US dollar index is still in an upward trend amid US economic recovery, weighing on copper prices.

On fundamentals, concerns over spot copper concentrate supply are unlikely to ease in the short term amid the stoppage of shipments to China from Oyu Tolgoi copper and gold mine in Mongolia, driven by port prevention measures against COVID-19 and strict regulations by Chile. Market expectations over the pandemic and concentrated maintenance at smelters should support copper prices to move at high levels.

SHFE copper will trade between 66,000-68,000 yuan/mt between April 6-9, and LME copper prices are expected to fluctuate between $8,850-9130/mt.

Spot quotes rose initially before falling last week amid adequate cash flows at traders and brisk downstream stockpiling. Spot discounts moved into premiums on Friday April 2. Downstream consumption is expected to pick up this week and traders will restock. Potential gains in SHFE copper prices will limit gains in spot premiums. Spot copper will trade with discounts of 20 yuan/mt to premiums of 50 yuan/mt.