The LME market was closed yesterday. The most active SHFE 2306 copper contract finished at 67,640 yuan/mt overnight, up 0.91%. Trading volume was 23,000 lots, and open interest stood at 182,000 lots. On the macro front, the dollar inched higher against a basket of currencies yesterday, shrugging off earlier weakness, as the market shifted attention from an unsurprising survey of lending conditions to other economic data that could provide new clues for the Federal Reserve's rate hike path.
Additionally, inflation data due later this week could provide clues to the outlook for US interest rates. On the fundamentals, as of Monday May 8, SMM copper inventory across major Chinese markets fell 700 mt from two Fridays ago but increased 45,900 mt from the same period last year. The big inventory decline in Shanghai is due to limited shipments arrivals over the weekend and active shipments leaving warehouses in east China amid tight copper scrap supply.
Inventories in Guangdong grew for two consecutive weeks as smelters preferred to make deliveries to warehouses. In terms of consumption, after the sharp drop in copper prices, the orders of downstream processing companies have not improved significantly, and the overall demand has not changed much. The liquidity crisis in the US banking industry has limited the upward momentum of copper prices, and copper prices are expected to remain relatively low in the short term.