SMM, December 27:
This week, overseas markets entered the Christmas holiday, with LME copper trading for only three days. Macro front news remained relatively quiet, the US dollar hovered at high levels, weak downstream demand, and increased domestic copper inventories all weighed on copper prices. As of 16:42 on December 27, LME copper rose 0.02% to $8,952.5/mt, with a weekly increase of 0.13%; SHFE copper fell 0.09% to 74,090 yuan/mt, with a weekly increase of 0.49%.
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Fundamentals
SMM: Copper inventories in major regions nationwide ended a 9-week consecutive decline
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Domestic inventory: As of Thursday, December 26, copper inventories in major regions nationwide tracked by SMM increased by 6,000 mt from Monday to 105,400 mt, up 6,700 mt from last Thursday, ending a 9-week consecutive decline with a slight rebound. Compared to Monday's inventory changes, most regions saw increases, except for Guangdong and Jiangsu, which experienced slight declines. Total inventory was 39,000 mt higher YoY than last year's 66,400 mt. Specifically, Shanghai's inventory increased by 8,800 mt from Monday to 80,900 mt, mainly due to the continued inflow of imported copper. Jiangsu's inventory decreased by 1,900 mt to 15,200 mt, while Guangdong's inventory also fell by 1,900 mt to 3,800 mt, primarily due to lower arrivals of both imported and domestic copper. Meanwhile, inventories in Chengdu-Chongqing and Tianjin increased, mainly due to weaker downstream consumption and higher arrivals from smelters.
LME copper inventories: LME copper inventories stood at 272,725 mt as of December 24.
COMEX copper inventories: COMEX copper inventories rose to 95,638 short tons on December 26, up 2,445 tons from 93,193 short tons on December 19.
This Week: Operating Rates of Copper Cathode Rods Fell More Than Expected, Copper Wire and Cable Operating Rates Declined as Expected
Copper cathode rod: The weekly operating rate of major domestic copper cathode rod enterprises (12.20-12.26) fell more than expected, with a significant WoW decline, while YoY growth narrowed. As the end of 2024 approaches, new orders in the market slightly declined, and more enterprises entered the year-end closing period, tightening funds or scheduling maintenance. This led to a WoW decline in the weekly operating rate of copper cathode rods. Notably, although new orders slightly weakened, many medium and large copper cathode rod enterprises maintained stable orders on hand, and stable operations are expected to continue after the New Year. 》Click to view details
Copper wire and cable: This week (12.20-12.26), the operating rate of SMM copper wire and cable enterprises declined WoW. New orders and production at copper wire and cable enterprises fell as expected this week, with downstream demand seasonally weakening. Most enterprises shifted their focus to payment collection, although some were still rushing to fulfill orders. Copper usage rebounded this week, but these enterprises indicated that the increase was mainly due to previous orders on hand. Once these orders are completed and delivered, copper usage is expected to decline. By order type, medium- and low-voltage orders weakened significantly, while high-voltage orders still showed demand. 》Click to view details
Outlook
Macro front: Next week, there will be few major macroeconomic data points influencing market trends. Key focus will be on PMI data from China, Europe, and the US, as well as US initial jobless claims.
Fundamentals: Looking ahead, according to SMM, domestic supply is expected to see higher arrivals of imported copper next week, and as year-end approaches, smelters face inventory clearance pressure, likely leading to a significant increase in arrivals. On the demand side, end-user enterprises are expected to continue controlling cash and inventory at year-end, leading to further consumption declines. Therefore, SMM expects a scenario of increasing supply and weakening demand next week, with weekly inventories likely to continue rising. LME copper inventories remain above 270,000 mt, and COMEX copper inventories saw a buildup this week. Attention should be paid to changes in overseas inventories next week. If both domestic and overseas inventories increase, copper prices will face downward pressure.
In summary, with the new US president set to return to the White House in January, the market is preparing for major policy shifts in 2025, including tariffs, deregulation, and tax reforms. Recently, the US dollar hovering at high levels has limited copper price performance. Future attention should focus on speeches and data affecting the US dollar's trajectory. Next week coincides with the New Year holiday, with initial focus on December PMI data from China and the US. If the data does not significantly exceed expectations, the macro impact on copper prices is expected to be limited. Fundamentals side, as the year-end and New Year approach, downstream consumption is likely to continue declining, while increasing supply may lead to further inventory buildup. Rising inventory pressure will weaken support for copper prices. With limited macro news, copper prices are expected to fluctuate rangebound next week.
Institutional Views
Zhengxin Futures stated that from a supply-demand perspective, the surplus pattern remains unchanged, with the global copper market still in surplus, a trend expected to continue into next year. Copper prices fell again due to overseas macro expectations, with the US dollar index reaching new highs. Overseas market prices face greater pressure, while domestic supply and demand are better than overseas. From the open interest level, there is limited increase in short positions, and price declines are expected to be limited, maintaining a pressured fluctuating trend.
Guotou Futures Research Report noted: SHFE copper faced resistance above 74,600 yuan during Friday's session and closed lower. Spot copper was priced at 74,240 yuan today, with Shanghai copper quickly turning to a 30-yuan discount. Year-end trade has slowed, and Guangdong copper premiums narrowed to 290 yuan. London trading resumed today, with short-term resistance during the Asian session still at $9,000. This week, social copper inventories increased, and shorts held positions near resistance zones.
Dongwu Futures stated: On the macro front, Europe and the US entered holiday periods, and China entered a policy vacuum period, reducing short-term macro impacts. The market awaits the implementation of domestic and overseas policy expectations after the New Year. On the fundamentals side, as year-end approaches, downstream operating rates face continued downward pressure, and inventories are gradually turning to buildup. The CSPT held its Q4 2024 general manager meeting and finalised the Q1 2025 spot copper concentrate TC guidance at $25/mt and 2.5¢/lb, continuing to decline QoQ. Insufficient raw material supply still supports copper prices, which are expected to maintain a fluctuating trend.
Citi Research stated that it holds a neutral to bearish outlook for industrial metals in 2025, forecasting copper prices to decline to $8,500/mt over the next three months.
Commerzbank predicts copper prices will rise to $9,700/mt by the end of 2025.
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