Copper prices to hover at highs

SHANGHAI, Apr 12 (SMM)—Speeches by Federal Reserve’s Janet Yellen and Powell last week lowered the risk of runaway inflation. In this scenario, the US dollar index fell to the 92 level, which dragged on the copper price, fluctuating in a narrow range of 66,500-67,500 yuan/mt.

Market concerns over liquidity contraction caused by high inflation have not been eliminated. The post-pandemic economic recovery of the United States will be faster than that of other developed countries such as Europe and Japan, which is the strongest driving force behind the US dollar. Although the US will not enter the interest rate increase cycle in the short term, with the warming of market risk sentiment, the rise of major assets will be restrained.

Focus of the week will be on the domestic GDP in the first quarter, US housing starts and monthly retail sales rate in March, and the March CPI reading in Europe and the US.

The domestic fundamentals have improved significantly. Although downstream consumption underperformed the peak season of previous years, domestic social inventory declined last week, boosting market confidence. In addition, smelters will gradually enter the maintenance season in April and May, reducing domestic copper supply slightly. The high season is expected to set in and fundamentals will keep copper prices fluctuating at high levels.

SHFE copper will trade at 66,300-67,500 yuan/mt this week, and LME copper prices will run at $8,880-9,130/mt.

Spot quotes fell before rising last week. Downstream buyers entered at 66,500 yuan/mt and stood on the sidelines after SHFE copper prices returned to high levels. Spot markets are unlikely to pick up noticeably as copper prices fluctuate narrowly at highs this week. Spot premiums are expected to stabilise and stand at 20-120 yuan/mt this week amid the peak month of April and as there are four days ahead of delivery.