SHANGHAI, Aug 15 (SMM) - Overseas, the newly released non-farm payrolls exceeded expectations, and the US unemployment rate also returned to a pre-pandemic low of 3.5%. Although the employment data has little impact on the US Fed's policy at present, the Fed may still be hawkish as the CPI may be affected by the hourly wage which recorded a gain of 5.2% YoY. In addition, several Fed officials emphasised the importance of controlling inflation last week, and the probability of a 75bp rate hike in September, as shown by FED Watch, once exceeded 80% (with a close of 68%). However, the US CPI in July fell short of expectations for the first time since February 2021 and rose 8.5% year-on-year, which was lower than the expected 8.7%. After the drop in CPI, US stocks rose sharply, but the US dollar index went down, and the yield of US treasury bonds changed little, cooling down the expectation of interest rate hikes. At present, the market presumes that the probability of the US Fed raising the interest rate hike by 75 basis points in September is less than 50%. And the Fed may probably raise the rate by 50 or 25 basis points in November and 25 basis points in December. After that, it will probably stop raising the interest rates, and it may begin to cut the rate as early as June 2023. Therefore, the nonferrous metal prices dropped first and then rose last week.

On the fundamentals, the supply of blister copper and copper scrap was relatively tight, while smelters including Jinchuan, Nanguo and Chifeng carried out maintenance in July, hence the July copper cathode output recorded a relatively low level of 840,000 mt. The output is expected to rebound to around 890,000 mt in August with the recovery of some smelters and the commissioning of projects led by Fuye. And in September and onwards, domestic copper cathode output is expected to step into a new phase with Fuye and Tongling commissioning as well as Wuxin and Daye (scheduled in October) starting to yield output. But in the near term, the monthly output growth will be mild as the expected power rationing in east China will restrict local production. On the mining end, the global copper mine production added 2.7% year-on-year from January to May, and domestic port inventories demonstrated an upward trend, keeping TC stable with some upside momentum. The transaction failure of copper concentrate cast a certain impact on the copper supply, but Chifeng Jintong ended its overhaul and resumed the production. On the demand side, new orders from infrastructure sectors continued to grow since mid-to-late July, and the demand from copper wire and cable companies kept growing. In this case, the operating rates of copper cathode rod companies quickly rallied to more than 70% following a brief decline due to the price fluctuations. Rumours of the copper stockpiling by the National Reserves Administration have not been officially confirmed yet. The most-traded SHFE copper contract is expected to move between 61,000-63,000 yuan/mt, and LME copper will trade between $8,000-8,300/mt.

In the spot market, the open interest of the SHFE 2208 contract still got 7,975 lots left, and 6,500 lots are going to be closed on the last trading day, making it possible for the spread between the front-month and next-month contracts to expand. The fluctuation of premiums on the last trading day based on the spread is of utmost concern. Spot premiums are expected to move between 0-400 yuan/mt this week.