SMM Copper Morning Comment

LME copper prices opened at $8444.5/mt and closed at $8438/mt in last Friday trading, a gain of 0.81%, with the low-end of $8409/mt and the high-end of $8498/mt. Trading volume was 24,000 lots, and open interest stood at 285,000 lots. The most active SHFE 2401 copper contract prices opened at 68260 yuan/mt and closed at 68540 yuan/mt last Friday evening, up 1.11%, with the high-end of 68800 yuan/mt and the low-end of 68260 yuan/mt. Trading volumes stood at 40,000 lots and open interest stood at 153,000 lots.

On the macro front, the U.S. non-farm payrolls increased by 199,000 in November after seasonally adjustment, which was higher than market expectations of 180,000. The unemployment rate dropped to 3.7% from a nearly two-year high of 3.9%. The strong employment data dampened market expectations. Expectations for the Federal Reserve to cut interest rates next year. Domestically, data showed that the CPI fell by 0.5% year-on-year and 0.5% month-on-month in November. The market expects that subsequent RRR cuts may still be possible. SMM data showed that as of Friday December 8, copper inventory across major Chinese markets stood at 57,600 mt, up 3,600 mt from last Monday and up 2,700 mt from two Fridays ago. The arrivals of imported copper in East China increased, while downstream procurement enthusiasm has been low due to high price premiums and price spread between front-month and next-month contracts, resulting in an increase in inventory; arrivals and demand in South China were small, and the overall inventory has not changed much. In terms of consumption, as delivery is approaching and the price spread between front-month and next-month contracts is high, the overall market demand is expected to be weak. There will be limited room for copper price increases.