Copper Prices Rebounded On Falling US Dollar Index

LME copper prices closed at $8,242/mt last Friday evening, up 1.02%. Trading volume was 17,000 lots and open interest stood at 256,000 lots. The most active SHFE 2307 copper contract finished at 65,320 yuan/mt last Friday evening, up 0.21%. Trading volume was 47,000 lots, and open interest stood at 170,000 lots. On the macro front, Federal Reserve Chairman Powell took a moderately dovish stance, contrary to market expectations, the US dollar index fell.

Markets lowered bets on another rate hike after Powell said the Fed might not need to raise rates as much given tighter credit conditions. SMM data shows that as of May 19, SMM copper inventory across major Chinese markets stood at 123,500 mt, down 17,600 mt from May 15 and down 28,500 mt from two Fridays ago.

The inventory was up 3,600 mt from the same period last year. Benefiting from the continuous decline in copper prices, the price difference between copper scrap and copper cathode narrowed significantly, boosting copper cathode purchases. This drove down inventory across major markets. In terms of consumption, downstream enterprises are currently more sensitive to price changes. If the price does not fall, it is expected that the demand will not change much. Copper prices are still mainly guided by macro influences. Driven by positive macro and fundamentals, copper prices will have support in the short term.

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