Copper Prices to Stay Volatile at High Levels in Aug

SHANGHAI, Aug 5 (SMM) - SHFE Copper kept fluctuating in July after June’s fall back. The overall prices stood above 68,000 yuan/mt in early July, and gained 5.23% on the month. The spot prices of SMM #1 copper cathode rose 4.64% on the month.

Fed meeting settled to maintain the interest rate unchanged, and Powell also stated that it was not time to tighten the monetary policy. US July ISM manufacturing data was lower than expected, indicating that the growth in the manufacturing industry had been slowed down for two consecutive months. The sweeping pandemic caused by the Delta COVID-19 variant across the world intensified the global concerns about the economic recovery.

The second batch of the copper reserve release has been settled, and the released amount was lower than expected, which slightly boosted copper prices. On the supply side, the overhaul of large domestic smelters has not yet been completed, and due to the expansion of the power curtailment, all major copper smelters in Guangxi have received power rationing notices. Some smelters even advanced their overhauls to August to avoid the production peak. It is expected that the domestic copper cathode production in August will not improve significantly from the previous month.

Escondida, the world's largest copper mine, voted last week to reject the final salary proposal of BHP. If the government mediation fails, the Escondida copper mine will have a strike, which may affect the output of millions of tons of copper. At the same time, two smaller mines, Codelco's Andina and JX Nippon Mining & Metals' Caserones, are also in negotiation with the owners. 7% of global copper production may be affected.

Domestic copper stocks kept falling for a long time to a record low. The continuous short squeeze in LME market limited the increase in the SHFE/LME ratio, and imported copper could not flow into domestic market smoothly. Domestic inventories are expected to remain low. Downstream demand for restocking was strong since July amid falling copper prices, which to some extend supported copper prices to stay high.

The surging pandemic from Nanjing, Jiangsu has affected many regions. Although there is no impact on production at present, the blockades in some areas have hindered the shipments, and some smelters have backlog of finished products, which may suppress the output. The copper rod smelter in Xinxiang, Henan is still in suspension due to the flood, and whether it will affect the upstream copper prices will be monitored.

The market will react more to the macro conditions in August, and copper prices are expected to remain volatile at high levels.