Copper Prices to Edge up amid Low Inventory

SHANGHAI, Nov 15 (SMM) – The October CPI in the US due last week increased by 6.2% year-on-year, the biggest increase in 31 years, and up 0.9% month-on-month, the largest gain in four months. The much higher-than-expected inflation data triggered market estimate that the Fed might raise interest rates earlier. Therefore, the US dollar index quickly moved up to 92.25, a new high since July 2020, weighing on the nonferrous metals prices.

On the other hand, China’s informal financing data topped expectations, driven by the real estate sector. Although the domestic real estate policies are still tight, the overall domestic monetary policy remains loose. And the expectations of the Fed's easing currency policy have been partially priced in, making the overall macro environment more stable. The market shall focus on the CPI reading in the UK and the Eurozone, and the speeches of the FOMC voting committees. It is expected that the overall macro environment will remain positive.

Fundamentally, the export of domestic smelters continued, and the inflow of imported copper remained at a relatively low level. At the same time, the south-east of Inner Mongolia, the central-north of Liaoning, the south of Jilin and the west of Heilongjiang have undergone blizzard since November 7. This has interrupted land transportation from north-east China to south China, keeping all the shipments of copper cathode from being delivered to south China. But the smelters maintained normal production thanks to sufficient raw materials. The land transportation to south China will gradually return to normal.

 The domestic social inventory have decreased by 12,600 mt. The backwardation structure of LME copper has gradually narrowed, and stood at $177/mt as of November 11, but it is still at a high level. The tight domestic and overseas supply will underpin copper prices in the long run.