[Institutional Research Report] Copper prices to continue to consolidate rangebound as potential inflation expectations strengthen

Recently, copper prices have remained rangebound at low levels. The backwardation of the SHFE front-month and next-month copper contracts expanded. The import window closed. On Wednesday, the spot market transactions were quiet. Downstream buyers purchased as required.

On the macroeconomic side: The 5-year forward inflation swap in the United States once exceeded 2.5% this week, reaching the highest level since 2014. There is a risk that underlying inflation expectations will continue to rise, and it will be more difficult to fall back to the long-term target of 2% within this year; the 5-year inflation swap rate in the eurozone reached a 13-year high of 2.66%. China’s July CPI turned into negative territory year-on-year (-0.3%), and the PPI bottomed out (-4.4%). The total industrial demand is still recovering slowly.

Industry: According to data released by the Peruvian Ministry Of Energy And Mines, Peru's copper output in the first half of the year reached 1.121 million tons, a year-on-year increase of 17.6%, mainly due to the contribution of the increased output of the Cuelavico and Las Bambas copper mines.

The risk of potential inflation expectations to continue to rise is still relatively high. Some officials of the Federal Reserve still support further interest rate hikes, which will put pressure on copper prices in the short term. Copper prices are thus expected to remain rangebound in a wide range in the near term.

Operation suggestion: cautious