SMM Copper Morning Comment

The SHFE market was closed last Friday evening. LME copper opened at $8620.5/mt and closed at $8536.5/mt. From a macro perspective, a conflict broke out between the US military and the Houthi armed forces on December 31, 2023, and the Red Sea crisis escalated again, which may further boost market risk aversion. The domestic PMI in December was 49.0%, a decrease of 0.4 percentage points from the previous month. The level of manufacturing prosperity has fallen, and consumption is expected to drag the copper price. In addition, the U.S. index closed higher last Friday, putting pressure on copper prices. On the fundamentals, as of Friday December 29, SMM copper inventories in major Chinese markets increased 16,000 mt to 66,400 mt from last Monday, up 9,800 mt from two Fridays ago. Inventories in Shanghai increased significantly due to decreased shipments against the rise in copper prices and the continuous flow of supplies into warehouses. Inventory continued to increase during the New Year's Day holidays, and the supply is expected to increase after the holiday. In terms of consumption, it is expected that downstream processing companies will have replenishment needs after returning from the holiday, but the overall demand will show an off-season effect. There will be limited upside room for copper prices as the US dollar index closed higher.