SHANGHAI, Apr 18 (SMM) - Last week, the US CPI in March hit the highest level in nearly 40 years, and the PPI also set a new high since 2010, highlighting the sustained inflationary pressure. The market expected that the US Fed would speed up the interest rate hike, and it may also shrink the balance sheet in May. The yield of the 10-year US Treasury bond rose to the highest level in recent days, so the US dollar index climbed to 100.76 from the 5-day moving average. Copper prices fell under the pressure of the rising US dollar. Supported by the 40-day moving average, the prices dropped to $10,153/mt at the beginning of the week. In the middle of the week, the US dollar dropped slightly, and accordingly, copper prices rose and moved between $10,300-10,400/mt. Last Friday, LME copper trading was closed for the Good Friday. The SHFE/LME price ratio improved again last week. In China, the closed-loop management in Shanghai will probably be prolonged. Recently, pandemic outbreaks have struck many places in China, which may affect the economy of the country in Q2 2022. A series of polies were issued at the executive meeting of the State Council, the most important of which is to cut the RRR rate in due course. Last Friday April 15, the People’s Bank of China stated that it would cut the RRR by 0.25 percentage point on April 25, 2022. China’s active stimulus policy has caused domestic commodities to rise. In the future market, the SHFE/LME price ratio will have a further improve. At the beginning of last week, the most-traded SHFE copper contract once fell to 72,930 yuan/mt, and then the prices reached a high of 75,100 yuan/mt, up 1.64% WoW, after the increase in positions, pinning a bullish trend for copper prices.
On the fundamentals, as of April 15 Friday, SMM copper inventory across major markets in China added 4,000 mt from Monday April 11 to 139,300 mt, down slightly by 1,000 mt from last Friday. The weekly inventory dropped again after a short increase two weeks ago. The pandemic outbreak in China is still the main theme of market transactions. Since the Ministry of Transport issued a document in the middle of the week, the logistics blockage situation has slightly improved, especially in east China which has been greatly hit by the pandemic. Looking forward, the social inventory is expected to fall again after the transport returns to normal when downstream processing companies will resume their production.
The most-traded SHFE 2205 copper contract is expected to trade between 73,500-76,000 yuan/mt, and LME copper will trade between $10,300-10,700/mt.
In the spot market, the rising futures prices, the high spot premiums and the pandemic dragged down the production of processing companies. Accordingly, the downstream purchase willingness was suppressed. After the delivery of the 2204 contract, the premiums in Jiangsu and Zhejiang may not be able to extend the rising trend last week. However, the premiums in Shanghai will be able to come back. Spot premiums are expected to move between 350-500 yuan/mt this week.
Disclaimer:
The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.
