The continuous rise in copper prices in November was mainly driven by the decline of the US dollar and domestic macro and fundamental support. The Federal Reserve was expected to pause interest rate hikes in December as the US employment data in October cooled significantly. The US dollar index fell from a high of 107. Moody's downgrade of the US credit rating weakened the US dollar further. The US October CPI increased by 3.2% year-on-year, which further verified that US inflation continued to cool down. The market began to expect interest rate cuts next year. The US dollar gradually fell below the 104 mark to 103, thus copper futures contract prices gained upward momentum. European economic data remained weak, and inflation continued to cool. The European Central Bank is expected to end this round of interest rate hikes. There was resistance to the euro.
In November, China-US relations improved and the yuan appreciated sharply, which boosted domestic sentiment. Copper contract prices thus regained upward month-onmonth. Although high copper prices suppressed downstream consumption in November and some copper rod factories shut down furnaces, the social inventory of copper cathode was still at a historically low level. Spot copper traded with premiums over the SHFE 2312 copper contract amid a high backwardation of the front-month contract over the next-month contract. Low social inventory supported high spot premiums. The benchmark copper concentrate TC under long-term contract was finalised at $80/mt and $0.08/lb. Spot supply of copper ore was expected to tighten in the wake of the shutdown of copper mines in Panama for maintenance. That further bolstered copper prices. LME copper prices in November stood close to $8,500/mt, and the most active SHFE copper contract prices rose to the 68,000 yuan/mt mark.
In December, the stronger-than-expected US non-farm data in November and the recent geopolitical conflicts caused the US dollar to rebound. The market expects a suspension of interest rate hikes in December, though. The continued weakness in eurozone data has gradually ended the strong trend of the euro against the US dollar in November. The US dollar got a boost. Copper contract prices maintained upward momentum h in the wake of a meeting held by the Political Bureau of the Communist Party of China (CPC) Central Committee on December 8, which set the tone for China’s economic work in 2024. Due to the replenishment needs of some domestic smelters, copper concentrate TCs have continued to fall, and the tight supply of copper concentrate has also provided support for copper prices. Due to the appreciation of the yuan in November, the import window against the SHFE front-month copper contract reopened. With the high premiums in China’s domestic spot markets, import profits against spot copper in Shanghai remained high. As such, the import volume of copper cathode in November is expected to be the highest in the year, and will fall back in December. Stocks are expected to accumulate slightly in December amid high copper prices and the off-season. LME copper is expected to trade between $8,250-8,600/mt in December and SHFE copper prices will fluctuate between 67,500-69,500 yuan/mt.
