SHANGHAI, Jan 9 (SMM) - The US ISM manufacturing PMI index in December 2022 was 48.4 (the previous reading was 49), which stood below the 50-point mark for two consecutive months, hitting a new low since May 2020. The market is worried about the intensification of the US economic recession. The US Fed's December meeting minutes showed that the Fed remained determined to curb inflation and insisted on a hawkish stance. Meanwhile, the US job market data performed strongly. The US dollar index burgeoned to 105, putting pressure on copper prices. OPEC released the December production data last week, which was slightly higher than that in November 2022, negating the previous rumours of production cuts. Accordingly, oil prices slumped. The multiple bearish factors once sent the copper prices into a nosedive to below 64,000 yuan/mt last week. In China, the government frequently introduced policies to boost the real estate industry. Many provinces and cities announced a reduction in the down payment ratio and relaxed the purchase restriction policy. In addition, Guangdong province arranged 17,722 investment projects in 2023 firstly, with a total amount of 6.5 trillion yuan, which slightly spurred the longs' sentiment.
On the fundamentals, some small and medium-sized enterprises began their Chinese New Year (CNY) holidays one after another last week, and most downstream companies took a CNY holiday 4-6 days earlier than in previous years, hence the consumption declined. Moreover, downstream producers were generally less willing to restock before the Chinese New Year, and the in-plant inventories of finished producers held by most copper cathode rod companies began to rise. SMM data showed that as of last Friday, copper inventory across major Chinese markets added 19,500 mt from the previous Friday to 117,500 mt. Generally speaking, the downstream consumption was slack near the year-end. Copper prices fluctuated due to the short-term bullish factors, but the prices are unlikely to grow further in the off-season. The most-traded SHFE copper is expected to move between 64,300-65,700 yuan/mt this week, and LME copper will trade between $8,350-8,500/mt.
In the spot market, the number of market participants will decrease this week as the downstream enterprises will take their CNY holiday one after another. SMM presumes that the spot premiums may fall rapidly to -50-50 yuan/mt this week.