Consumption remained weak, and premiums were under pressure; copper prices retraced gains overnight [SMM Copper Morning Comment]

LME copper opened at $9,696.5/mt overnight, initially reaching a high of $9,707/mt before declining throughout the session, hitting a low of $9,548/mt. It then consolidated and closed at $9,562/mt, down 0.63%, with a trading volume of 18,000 lots and an open interest of 276,000 lots. The most-traded SHFE copper 2412 contract opened at 77,650 yuan/mt, initially reaching a high of 77,770 yuan/mt before declining throughout the session, hitting a low of 76,660 yuan/mt. It then consolidated and closed at 76,860 yuan/mt, down 0.71%, with a trading volume of 45,000 lots and an open interest of 161,000 lots. Macro side, the PBOC cut the one-year and five-year loan prime rates by 0.25 percentage points each. Copper prices surged yesterday but retraced gains overnight due to weak consumption. Additionally, US Fed officials indicated that the neutral rate might be higher than before, and if the job market weakens, interest rate cuts might need to be accelerated. Fundamentally, supply side, domestic arrivals decreased. Although copper prices rose significantly, warehouse warrants continued to flow out, putting pressure on premiums. The price spread between futures contracts widened, reducing the willingness to sell among holders. Overall trading remained weak. As of Monday, October 21, SMM copper inventories in major regions across China decreased by 9,800 mt compared to last Thursday, reaching 219,400 mt. Post-holiday inventories finally declined. However, total inventories were 135,100 mt higher compared to 84,300 mt in the same period last year. In summary, consumption remained mediocre with no significant recovery in sight, and copper prices are expected to lack support today.