Copper Prices Move Rangebound amid Market Fears over Fed Pausing Interest Rate Hikes

LME copper prices closed at $8,293/mt overnight, a decline of 0.38%. Trading volume was 21,000 lots and open interest stood at 252,000 lots. The most active SHFE 2307 copper contract finished at 66,690 yuan/mt overnight, up 0.23%. Trading volume was 48,000 lots and open interest stood at 187,000 lots.

On the macro front, after the Bank of Canada unexpectedly raised interest rates by 25 basis points, the U.S. dollar index fell. At the same time, the market was concerned about the suspension of US interest rate hikes in June. Markets were awaiting next week's inflation data which will gauge the path ahead of the Fed's rate hike meeting. In terms of fundamentals, import losses continued to expand. It is expected that the inflow of imported goods in the market will be limited, and smelters will conduct concentrated maintenance in June.

Tight spot supply will unlikely alleviate in the short term. In addition, entering June, copper prices continued to rise, the demand of downstream enterprises was not strong. And the enthusiasm for purchasing was also lower than before. Inventory in south China fell again, mainly due to the lack of arrivals. With the rebound of copper prices, the price gap between copper cathode and copper scrap widened, strengthening the substitution of copper cathode by copper scrap. Copper cathode consumption weakened. Copper prices are expected to remain rangebound before the announcement of the Fed’s rate decision.

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