[SMM Review] Low Inventory Will Underpin Copper Prices

SHANGHAI, Feb 7 (SMM) - LME copper prices bottomed out during the Chinese New Year (CNY) holiday, which closed at $9875/mt last Friday, up $121/mt or 1.24% from the pre-CNY holiday level. Copper prices dropped at the beginning of last week amid falling China PMI. LME copper later rallied supported by better-than-expected US economic data and tightening liquidity in the UK and eurozone, which resulted in continuously falling US dollar index. On the other hand, LME copper inventory stood at 82225 mt as February 4, down 9125 mt from the pre-CNY holiday level of 91350 mt.

The demand in the first week post the CNY holiday is likely to underperform last year owing to the resurging COVID-19 pandemic. However, the demand will pick up soon with the quickly rising operating rates and multiple supporting national policies issued before the CNY holiday.

In terms of inventory, SMM believes that the post-holiday copper inventory will rise more slowly than last year, and copper prices are expected to climb amid low inventory. The market shall watch if the US Federal Reserve will accelerate the tightening of liquidity.