Copper Prices Remained High Supported by the Tight Spot Supply in China and Overseas

SHANGHAI, Sep 13 (SMM) - On the macro front, since the US Fed Chairman Powell delivered a hawkish speech at the central bank meeting, other Fed officials conveyed their anti-inflation stance and determination. And the market expected the Fed to raise the interest rate by 75 basis points at the FOMC meeting in September. Key US inflation data for August will be released this week, and is expected to ease amid falling gasoline prices. However, it is unlikely to weaken the market’s expectations for a 75 basis points rate hike. At the same time, the substantial interest rate hike by the European Central Bank put pressure on the US dollar, which made the US dollar index fall but boosted the nonferrous metal prices. In China, the financial data improved in August, especially the medium and long-term credits. The domestic demand began to grow, but the enterprises and residents were more willing to save. The government of Zhengzhou city in Henan province held a meeting to ensure the resumption of suspended real estate projects to stabilise the market confidence.

Last week, the fundamentals resonated with the macro front. Overseas, LME copper inventories maintained a downward trend and reached 100,000 mt, and the premiums over the LME cash-to-three-month contract soared to a new high since the end of November 2021. Workers at Chile’s Escondida copper mine, the world’s largest copper mine, threatened to strike over safety concerns, intensifying the market worries about supply. In China, the supply of copper cathode did not increase significantly as expected. The pandemic in east Inner Mongolia hindered the transportation of smelters in the region, and the imported goods could only flow into the market at the end of last week, resulting in the decline in social inventory and the bonded zone inventory. After the Mid-Autumn Festival holiday, the social inventory may drop in the peak season of consumption in September and October. The most-traded SHFE copper is expected to move between 61,000-64,500 yuan/mt this week, and LME copper will trade between $7,600-8,100/mt.

In the domestic spot market, it was reported that since last Thursday afternoon, more imported copper has been moved into the warehouses in Shanghai, and the supply pressure will appear after the holiday. This week, which is the last week before the delivery of the SHFE 2209 copper contract, the spread between the front-month and next-month SHFE contracts in the backwardation structure may expand further, suppressing the premiums day by day, and the spot prices may even be quoted at discounts. But after the delivery, the spot prices will recover to premiums. Spot premiums are expected to move between -50 - 350 yuan/mt this week.