SHANGHAI, Jun 17 (SMM) - In the futures market, LME copper opened at $9,116/mt yesterday and rose to $9,168.5/mt after dropping to $9,020/mt. At last, the prices closed at $9,126/mt, down 0.89%. Trading volume was 20,000 lots, and open interest stood at 231,000 lots. SHFE 2207 copper contract opened at 69,820 yuan/mt in overnight trading and rebounded from a low of 96,150 yuan/mt. At last, the prices closed at 69,520 yuan/mt, down 1.78%. Trading volume was 14,000 lots, and open interest stood at 135,000 lots.
On the macro front, (1) The Bank of England raised the interest rates by 25 basis points to the highest level since 2009 and hinted that it would take stronger action to curb inflation if necessary. (Bearish ☆) (2) On June 16, local time, the three major indexes of US stocks closed down sharply. The Dow fell by 2.42%, closing below 30,000 points for the first time since January 2021. Nasdaq fell by 4.08%, creating the lowest level since November 2020. The S&P 500 index fell by 3.25%, hitting the lowest since late December 2020. (Bearish ☆) (3) The US announced that it would impose new economic sanctions on Iran, and energy prices rose, with US oil up by 1.52% and Brent Crude up by 0.44%. (Bullish ☆)
In the spot market, (1) Shanghai copper cathode spots were quoted at premiums of 260-300 yuan/mt yesterday, and the average premium was 280 yuan/mt, up by 15 yuan/mt from the previous day. On the first day after the delivery of the 2206 contract, traders were still looking for opportunities to restock, intending to suppress the premiums. However, the goods-holders refused to reduce their prices. Recently, the SHFE/LME price ratio has risen to around 7.65, and the import window opened many times. Therefore, the sources of spots were not tight, and the cargo holders could hardly hold firm to their prices. For the traders and downstream, the premiums of 250-300 yuan/mt were high.
(2) In the south China market, On June 16, premiums of the #1 copper cathode spot in Guangdong were 30-80 yuan/mt. The average premium was 55 yuan/mt, down by 25 yuan/mt from the previous trading day. Inventory in Guangdong declined slightly as the arrival decreased after the smelters finished the delivery. In the early trading, the cargo holders still held firm to the prices, and the premiums of high-quality copper stood at 50 yuan/mt. However, the market was still very quiet, especially in the small orders market. Most traders were still worried about the problem caused by the warehouse incident, and they were not active in restocking and only purchased on rigid demand. Therefore, the cargo holders had to cut their prices to ship. Generally speaking, the decline in inventory could not prevent the premiums from falling as the market trading was slack.
(3) Imported copper: On June 16, Yangshan copper premiums were quoted at $58-74/mt under warrants. The average price was $66/mt, $3.5/mt higher than the previous trading day, with the quotation period of July. Quotes under B/L stood at $50-67/mt. The average price was $58.5/mt, flat from the previous trading day, with the quotation period of July. The quotation refers to the prices of goods arriving at ports in late June and early July. The discounts of LME 0-3 were $5.5/mt. The import losses were around 250 yuan/mt over the 2207 copper contract as of 10 a. m. yesterday. The spot imports remained profitable, and the import losses over the 2207 copper contract narrowed to around 250 yuan/mt in the early trading. The rising price ratio attracted more inquiries this week. Besides, the high spot premiums in China enabled the traders to hold firm to the prices. According to the survey, the logistics conditions improved, and the operation in warehouses became normal. Profits of spot imports boosted the inquiries of warrants. The high-quality copper was quoted at $74/mt under warrants, and the domestic pyro-copper was quoted at around $65-70/mt. The traded price of a domestic pyro-copper was $67/mt, and that of the hydro-copper stood at around $58/mt. The prices of high-quality copper under the bill of lading arriving at ports in early July stood at $75/mt, and these of mainstream pyro-copper were $72/mt However, the market had seen no transactions yet.
(4) Inventory: On June 16, LME copper inventory decreased by 525 mt to 121,000 mt. The copper inventory in SHFE increased by 1,798 mt to 21,343 mt.
Price forecast: The data showed that the number of jobless claims in the US fell less than expected at the beginning of last week, but the labour market remained tense. The Fed's sharp interest rate hikes weakened the related economic data overseas, and the positive efforts made by the Fed to slow down demand and reduce the inflation rate to 2% may have begun to show results. At the same time, the market's worries about the economic recession have intensified, and non-ferrous metals were under huge pressure. LME copper will trade between $9,030-9,130/mt today; SHFE copper prices are expected to move between 69,100-69,700 yuan/mt. Spot premiums are likely to fluctuate between 200-300 yuan/mt.
