Positive macroeconomic factors helped increase copper prices

The 2024 Government Work Report pointed out that this year's GDP in China is expected to grow by about 5%, and consumer prices will increase by about 3%. China’s A-shares stabilised at 3,000 points, and there was a positive domestic macro sentiment. The US dollar continued to close with losses in the week ending March 8, and hit a low of nearly 103.2 during the week. US ADP payrolls in February increased from the previous value, and the number of job vacancies dropped slightly to 8.863 million in January. The labour market demand was still strong; however, the market expects that the number of jobs added in non-farm sector in February will decline and wages are expected to slow down. The Federal Reserve reiterated that it is in no rush to cut interest rates and added that interest rate cuts need to be "cautious and thoughtful." However, Powell's subsequent hints about interest rate cuts caused the dollar to fall. The US dollar fell in mid-week, and the euro against the US dollar gained. The euro fell in the second half of the week. The Governor of the Bank of Japan said that "monetary policy can be tightened by raising the interest rate on excess reserves." The certainty of Japan's interest rate hike has increased. The US dollar continued to fall against the yen during the week, and the Nikkei index exceeded 40,000. The fall in the US dollar, favourable domestic data, and previous gains in crude oil prices helped copper prices continue to rise. However, inventories continued to accumulate.

SMM data shows that social inventories of copper cathode grew as high copper prices slowed the growth of new orders for copper semis. The inventories of some finished copper rods increased by 15% week-on-week. Consumption is still weak for the time being. However, the spot trading of copper concentrate has been weak, and the tight ore supply has not changed. SMM understands that the tight ore supply has caused some smelters to reduce their feed input. As the demand for copper cathode gradually recovers, its supply will tighten. Hence the backwardation structure remains strong. In the week of March 11, the US CPI and PPI data will be a market focus. If the CPI falls, it is expected that the market will continue to bet on interest rate cuts, and the dollar will hardly gain momentum. LME copper is expected to trade between $8,450-8,700/mt in the week of March 11 and SHFE copper prices will fluctuate between 68,500-70,000 yuan/mt. Under the contango structure, it is expected that the sellers will be less willing to ship at low prices before the delivery of the SHFE front-month contract, and the spot discounts may be reduced. The spot discounts are expected to be 80-20 yuan/mt.