The copper futures prices rose during the week. The falling US dollar at the beginning of the week eased the pressure on copper futures. With the release of major domestic macroeconomic policy, copper contracts prices rebounded even as the US dollar returned to above 106. The dollar fell below 106 points at the beginning of the week amid Powell's dovish speech and the decline of the 10-year US Treasury bond from highs. However, the US manufacturing and services PMIs in October both exceeded expectations, and US residents were still highly motivated to buy new homes despite high loan interest rates, sending the US dollar rising above 106. US Treasury bond yields also rose again, approaching 5%. While the strong US dollar weighed on copper futures, prices climbed to the 20-day moving average. Eurozone's composite PMI in October continued to fall to 46.5 after recording 47.2 in September, hitting a 35-month low. The decline in European economic activity has accelerated, which should be a factor for the European Central Bank to consider suspending interest rate hikes, pushing the US dollar to rise.
Chinese government will issue an additional 1 trillion yuan debt, improving domestic macroeconomic sentiment. A-shares ended their declines and rose. Copper contract prices rebounded.
As copper prices rebounded, the price spread between copper cathode and copper scrap widened compared with a week earlier. The increase in new orders for copper rod produced with copper cathode began to slow down during the week. The higher operating rates during the week were mainly due to the resumption of production at copper rod plants using copper cathode as raw material in north China. The consumption of copper rod produced with copper cathode last week turned cautious. According to SMM data, copper inventories in China’s mainstream markets decreased by 18,800 mt during October 21-22, and imports were limited last week. The resultant tighter spot supply shored up copper futures prices. However, LME copper inventories have dropped from 190,000 mt, with significant shipments from LME copper inventories at Asian warehouses. Most of these cargoes are expected to arrive in China, growing the influx of imported copper.
US PCE data are due on Friday October 27, and the Federal Reserve's November interest rate decision will be announced on Thursday November 2. The US dollar has gradually returned to its previous high but is unlikely to breach this level, mitigating pressure on copper prices. LME copper is expected to trade between $7,950-8,150/mt this week and SHFE copper prices will fluctuate between 66,000-67,500 yuan/mt.
In China’s spot markets, trades will be subdued due to month-end cash flow issues and expectations of copper price gains. If the inflows of imported copper increase this week, the spot premiums will fall to 100-250 yuan/mt.
