SHANGHAI, Jan 10 (SMM) – The copper prices edged lower and moved between 69,000-70,500 yuan/mt last week. The Federal Reserve's meeting minutes in December 2021 indicated that it may start to scale back its balance sheet after the first interest rate hike, which will be earlier and faster than in history. This statement significantly exceeded market’s expectations and triggered sharp fluctuations in asset prices. However, the assets tend to be impacted in a short term as the market logic may return to a strong economic growth period after quickly digesting the hawkish signal of the Federal Reserve.

The market still needs to pay attention to the US non-farm payrolls as well as the domestic and overseas CPI and PPI before judging the domestic and overseas policy trends. China will maintain relatively loose policies before the Chinese New Year to ensure the steady operation of the overall economy, and the scissors difference between PPI and CPI is expected to narrow before CNY. The domestic macro may continue to improve, which will stabilise the copper prices.

According to SMM statistics, the domestic copper cathode output in December far exceeded market expectations and stood at 870,300 mt, a month-on-month increase of 5.38% and a year-on-year increase of 0.97%, the highest in H2 2021, mainly driven by the ending of maintenance at smelters at the year-end, the rapid recovery of some smelters from the industrial accidents as well as the year-end busy production.

On the raw material side, the shortage of copper anode supply has been gradually alleviated. With the slight improvement of the shipping issues at the ports of South Africa, the import of copper anode basically returned to normal in November. Only a small number of smelters in coastal provinces underwent a slight shortage of blister copper and have not yet reached full production. Meanwhile, domestic social inventories have declined further on the month, and the high apparent consumption signifies that the domestic consumption is still resilient. As such, the copper prices will have solid supported at 69,000 yuan/mt.