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On the fundamentals, inventories across China were decreasing rapidly, which strongly supported the rebound of copper prices. The main reasons for the decline were that the imported copper failed to flow smoothly into the domestic market when the import window opened, and the domestic smelters were under maintenance. Meanwhile, owing to the tight supply of blister copper in some smelters, the output decreased slightly. As for the consumption, the overall performance was not encouraging, but the short-term narrow spread between the copper cathode and copper scrap supported the copper cathode consumption to some extent.
Overall, the slight easing of the bearish factors on the macro front and the tight spot supply in China are the important driving forces for the rebound of copper prices. Before the US Fed's interest rate meeting in September and the 20th National Congress of the Communist Party of China in the second half of 2022, copper prices will rise further under the support of fundamentals. The most-traded SHFE 2209 copper contract is expected to move between 59,000-61,500 yuan/mt, and LME copper will trade between $7,700-8,000/mt.
In the spot market, although the SHFE/LME price ratio improved slightly, the inventory and absolute price still remained low. Traders held firm to their prices when the SHFE warrants were less than 8,000 mt. It is expected that the buyers and sellers will wrestle centring the price level, and the market shall keep an eye on the fluctuation in the spread between the front-month and next-month contracts and the change of premiums based on the SHFE/LME price ratio. The spot premiums are expected to move between 250-400 yuan/mt this week.
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