Eased Liquidity Crisis of Banks and Weaker Risk Aversion Led to Gradual Rebound in Copper Prices

SHANGHAI, Mar 27 (SMM) - Six major central banks jointly acted to provide liquidity for the US dollar to alleviate the banking liquidity crisis last week. Combined with Credit Suisse being acquired by UBS under the intervention of the Swiss government, market panic over banking liquidity risk eased, and risk aversion abated. In this scenario, copper prices gradually rallied.

In addition, the Federal Reserve raised interest rates by 25 basis points last Wednesday, in line with market expectations, which further cooled the market's concerns about liquidity risk spillovers in the US banking industry. The Fed lowered its forecast for US economic growth this year to 0.4% from 0.5% in December. The latest economic forecast by the Fed indicates that the United States is facing a serious risk of economic recession, and the market needs to continue to pay attention to its impact on the prices of commodities such as copper in the future. Following the European Central Bank's decision to continue raising interest rates by 50 basis points, the Bank of England said it would continue to raise interest rates by 25 basis points in the face of higher-than-expected inflation, putting further pressure on the dollar and helping copper prices rise.

In China, a slew of favourable macro policies on real estate and infrastructure have helped consumption gradually recover. Overseas investment institutions still have great expectations for China.

SMM data showed that copper inventories across mainstream markets in China fell 26,100 mt from 226,100 mt a week earlier to 200,000 mt as of last Friday March 24. The destocking degree was in line with SMM's forecast. The continuous flows of imported copper into the domestic trade market slowed down the destocking rate.