Possible Fed Rate Hike due to Resilience of US Economy will Put Pressure on Copper Prices

LME copper prices closed at $9,044/mt last Friday evening, a decline of 0.3%. Trading volume was 22,000 lots and open stood at 257,000 lots. SHFE 2305 copper contract prices finished at 69,850 yuan/mt last Friday evening, down 0.3%. Trading volume was 51,000 lots, and open interest stood at 183,000 lots.

On the macro front, some US retail sales data released in March were not as weak as some economists had feared, and the US economy remained resilient. A Fed policymaker warned that the Fed needs to continue raising interest rates to reduce inflation, and the US dollar index rose, weighing on copper prices. On the fundamentals, as of April 14, SMM copper inventories in major Chinese markets decreased 4,600 mt from last Monday to 190,100 mt, down 12,200 mt from two Fridays ago.

Due to the expansion of import losses, the inflows of imported copper decreased last week, helping digest warehouse inventories. Among major Chinese markets, only Shanghai saw increased inventories due to the nearing of the delivery of the SHFE front-month contract. Inventories in other regions fell or remained unchanged. In terms of consumption, sluggish end-user demand combined with higher SHFE copper prices will prevent consumption from improving significantly in the short term.

A barrage of US economic data has a strong guidance on copper prices, and the renewed expectations of US interest rate hikes will put pressure on copper prices.