In the week ending April 26, copper prices fell slightly first and then rose. While the Federal Reserve continued to make hawkish remarks, the US dollar has rolled back gains, easing the pressure on copper prices to a certain extent; the decline in international gold prices and China’s A-shares in the first half of the week caused a slight drop in copper prices, but the 10-day moving average provided strong support. In the second half of the week, copper prices rebounded to above the 5-day moving average. In the US market, on Wednesday, the US Energy Information Administration announced that US crude oil inventories decreased by 6.368 million barrels on April 19. Crude oil prices stopped falling and rebounded, and copper prices were also boosted. Goldman Sachs raised its forecast for US PCE inflation in December 2024 to 2.6% from 2.5%, but the market has already factored in expectations that the Federal Reserve will delay its rate cuts. The US dollar did not continue to be strong in the second half of the week, easing pressure on copper prices. In the first quarter of 2024, the US real GDP grew at an annualised rate of 1.6%, the worst data since the economic contraction in the second quarter of 2022; the flash annualised core PCE price index in the first quarter was 3.7%, far higher than expectations and the 2% inflation target.
In the European markets, the improvement in German business morale in April exceeded expectations. Economists said that the IFO and PMI showed that German economic activity had bottomed out and the current business environment had improved to a satisfactory degree. However, the continued sluggishness of France's manufacturing may continue to drag down the overall economy. The eurozone's composite and service PMIs in April were 51.4 and 52.9 respectively, both hitting 11-month highs; but the manufacturing PMI was 45.6, a four-month low. The euro against the US dollar rose.
In the Chinese markets, the People's Bank of China (PBOC) announced that the Loan Prime Rate (LPR) remained unchanged on April 22. However, the positive performance of the latest PMI data continued to support domestic macro sentiment. US Secretary of State Blinken visited China in an attempt to ease tensions between the two countries, and the RMB exchange rate temporarily stabilised.
Copper prices remained high and surged again at the end of the week. All SHFE copper contracts prices exceeded the 80,000 yuan/mt mark, suppressing the downstream stockpiling for the Labour Day holiday. SMM expects the operating rates of copper rod plants using copper cathode as raw material to decline in the week of April 29. SMM data shows that social inventories of copper cathode continued to accumulate, and spot consumption was still poor.
The Federal Reserve is expected to continue to maintain interest rates unchanged in May. LME copper is expected to trade between $9,750-10,000/mt in the week of April 29 and SHFE copper prices will fluctuate between 78,000-81,000 yuan/mt between April 29-30. Spot discounts are expected to be 260-200 yuan/mt in view of sluggish sales amid high copper prices and high inventories.
