Fundamentals to weigh on copper prices despite strong start this week

SHANGHAI, Jun 11 (SMM) – Despite rebounds in Shanghai copper prices in the week to Tuesday June 11, SMM retains a bearish outlook on copper prices in June as an approaching low season will further weaken consumption.

SMM expects the most-active SHFE August copper contract to face pressure from the 47,500 yuan/mt level in the short term. 

The August copper contract rebounded for two consecutive trading days as of Tuesday June 11, by some 2%, after it fell to a two-year low, below the 46,000 yuan/mt level last Thursday. 

Improved macroeconomic sentiment accounted for the rebound. The US dollar dropped on disappointing nonfarm payroll data last Friday, and this also eased pressure on copper prices. 

Output recovery from maintenance across copper smelters will keep the domestic market well-supplied in June. SMM data showed that China’s production of copper cathode is expected to recover to 704,900 mt in June, up 71,400 mt from May. 

Seaborne copper materials continued to enter the domestic market in an open import arbitrage window, as evidenced by falling copper inventories across Shanghai bonded areas. This is also set to grow pressure on copper prices in the short term. 

Copper consumption failed to receive a boost from downstream sectors in May. An SMM survey found that the operating rates across copper products processors shrank some 1 percentage point on the year in May. 

However, tighter inflows of waste imports are expected to remain supportive of the consumption of copper cathode.