SMM Analysis on Copper Price Trend Following Huge Fluctuations

SHANGHAI, Mar 16 (SMM) – Since the copper prices experienced huge fluctuations last week, the market has various opinions on the trend of copper price. Some people think that the copper prices will rise again and may reach 75,000 yuan/mt, while other people believe that the prices cannot rise significantly. SMM analyses the copper price trend based on the fundamentals and macroeconomics as follows.

There are multiple uncertainties in the market worth attention today. The first uncertainty is the LME nickel, of which the trade was resumed at 16:00 Beijing time. The LME nickel prices rose from around $20,000/mt to $100,000/mt last week, and boosted other base metals prices. SHFE copper prices surged to around 77,000 yuan/mt and pulled back, which triggered panic in the market. LME halted the trade of nickel and adjusted the prices to around $50,000/mt. The prices dropped rapidly after opening today, which is likely to drag down the prices of other non-ferrous metals. It may cause the SHFE nickel prices to fall in the overnight trading. However, it can hardly change the copper price trend.

Another uncertain factor is the Fed’s interest rate decision at 3:00 a.m. Beijing time on Thursday. The market generally believes that the interest rate will be raised by 25 basis points in March, and if Powell gives hawkish comments at the conference press afterwards, the market may expect the interest rate to be lifted by 50 basis points in May, which will weigh on copper prices. However, considering that interest hikes will pressure the economic growth, and the various sanctions will also damage the economy, the Fed’s interest hikes are expected to be milder.

Russia and Ukraine are still in the stage of military confrontation. The negotiations made good progress at the beginning of this week, but seemed to be hindered again on today. The crude oil prices pulled back slightly, suppressing the inflations. As the market holds stable expectations for the Fed’s interest hike, the copper prices will be positively correlated with the inflations.

The recurring COVID-19 pandemic across China also impeded the logistics. If the pandemic continue to spread, the end consumption of copper may be affected.

In terms of fundamentals, the LME copper inventory remained low and stood at 77,525 mt as of the time of this writing, higher than the 69,600 mt on March 8. The domestic copper inventory also dropped slightly, supporting the copper prices to remain high. However, the LME copper inventory may soon rise to 80,000 at the current speed of increase, which will weigh on the current copper prices.

The present copper prices still stand firm, and are unlikely to weaken unless all the bearish factors are fully realised. The copper prices have strong support at around 71,000 yuan/mt in the short term. If the prices fall below this level, the prices may stagnate and risk 70,500 yuan/mt. If the prices drop below 70,500 yuan/mt, the prices may keep falling for a period of time.