Expectations of Declining Transactions Dominated the Market, and Copper Prices Remained Rangebound with Downward Risks

SHANGHAI, Jul 18 (SMM) - Last week, the shorts still dominated the market. The growth of the overall US CPI and the core CPI in June released at the end of the week both exceeded market expectations, with the CPI increasing by 9.1% YoY, which was expected to be 8.8%, and the core CPI rising by 5.9% YoY, which was expected to be 5.7%. The world is experiencing enormous pressure of inflation brought by the Russia-Ukraine war and the mismatch of global supply and demand. After the global central banks successively raised the interest rates, the market players continued to trade economic recession expectation. On Friday night, the hawkish Fed officials expressed their support for raising the interest rates by 75 basis points in July, which still failed to save the market from collapsing. In China, a series of economic data was released on July 15, and the GDP in the second quarter increased positively year-on-year. The follow-up stimulus policies can still be expected. On the fundamentals, smelters maintained stable production. When the import window opened in the past several weeks, copper cathode stored in the bonded warehouses was moved to the domestic market one after another and approaching the delivery of the 2207 contract, some imported goods were registered as warrants, resulting in a slight increase in the domestic inventory. At the same time, due to the continuous sharp drop in copper prices, the supply of copper scrap plummeted, so the spread between the copper cathode and copper scrap narrowed, which is beneficial to copper cathode consumption to a certain extent.

As for domestic consumption, the real estate industry still did not improve. Frequent reports of shutdown in some areas indicated that the real estate sector cannot pick up in the short term. The overseas monetary tightening policy continued to advance, and the central banks raised the interest rates one after another. The market risk appetite went down further, thus the expectations of declining transactions dominated the market, and copper prices remained on the downward track. The most-traded SHFE 2208 copper contract is expected to move between 53,000-55,000 yuan/mt, and LME copper will trade between $6,850-7,200/mt.

Although the SHFE/LME price ratio did not favour the import market, some traders still insisted on importing, and the spot premiums could hardly be kept at 200 yuan/mt. After the delivery of the SHFE 2207 copper contract this week, the premiums cannot reach beyond 200 yuan/mt amid continuous falling copper prices and poor consumption. Spot premiums are expected to move between 120-200 yuan/mt this week.