Copper Prices are Under Pressure

SHANGHAI, Dec 6 (SMM) – SHFE copper prices trended lower last week, with the support at 68,500 yuan/mt for the most active contract. The market has priced in the COVID-19 variant in South Africa. The market fundamentals mainly focused on Fed Chairman Powell’s hawkish speech last week. He mentioned speeding up the tapering of the bond purchases in congressional hearings. The US dollar index rebounded rapidly but fell again after the market sentiment stabilised. The Fed's concession on the inflation issue does not mean that the Fed will necessarily take a big step toward a tight policy. It is expected that the market's attention will be drawn back to the job market, focusing on non-farm data and Powell's speech at the FOMC meeting this week. The Fed's assessment of the job market will shed light on the potential interest rate hike in the future. The market will also focus on the CPI and PPI data of China and the United States.

The domestic copper cathode output in November topped expectations and stood at 825,900 mt, a month-on-month increase of 4.6% and a year-on-year growth of 0.5%, according to SMM survey. With the end of the power rationing, the output of domestic smelters returned to the pre-power rationing level. However, the imports of blister copper have not improved due to the riots in Africa, shortage of containers and global supply chain issues. The smelters in some coastal provinces failed to operate at full capacity amid the continued shortages of blister copper, affecting the copper cathode output in November. Meanwhile, important ports in north China have been closed due to pandemic prevention and control measures, and the smelters in north-west China could hardly secure enough copper concentrate supply, also dragging down the copper cathode output. The output of copper cathode in December is expected to return to the mid-year high as the smelters work against the clock. At the same time, the customs input invoice issue has been alleviated, removing the constraints for importers. As such, the domestic supply is expected to improve significantly.

The consumption side can hardly see any highlights. The downstream buyers purchased on demand even as concentrated deliveries to the infrastructure projects of the State Grid are due at the end of the year. The domestic inventory is likely to see a pivot, pressuring the copper prices.