Copper prices surged before falling

In the week ending April 12, prices of multiple SHFE copper contracts jumped above 76,000 yuan/mt, and even broke through 77,000 yuan/mt; some of the price gains were rolled back in the second half of the week. In the US market, the US dollar fell in the first half of the week. The market focused on the CPI in March. After the data was released, the markets expected fewer interest rate cuts this year and postponed the time of the first interest rate cut. The US dollar index surged to 105 and that weighed on copper prices. The US PPI data for March was lower than expected, which may partially ease inflationary pressure. The US dollar index gave up some gains but still remained above 105. The Fed meeting minutes showed that there would be no interest rate cut for the time being. The European Central Bank was expected to cut interest rate in June; the euro fell significantly against the US dollar.

In the Chinese market, CPI fell month-on-month in March, while the year-on-year growth rate declined and the extent exceeded market expectations. On April 10, the Shanghai Futures Exchange (SHFE) said it will impose trading limits on its gold and copper contracts. On April 11, the State Council Information Office held a regular briefing on the State Council’s policies to introduce the Action Plan for Promoting Large-Scale Equipment Updates and Consumer Goods Trade-ins, which attracted market attention. This will benefit copper-related end products such as automobiles and home appliances, which to a certain extent limited the decline in copper contract prices. Copper contract prices fell from highs, with eyes on the support from the 5-day moving average.

The fundamentals remained weak in the week ending April 12. There was no sign of improvement in copper concentrate TCs. Spot trading was quiet, and social inventories continued to accumulate. Nonetheless, smelters seized the export opportunity and actively exported. Combined with the maintenance of some smelters in April, it is expected that social inventory will be reduced in the second half of April. In the week of April 15, copper prices will be more guided by macroeconomic factors. The US dollar does not have the conditions to continue to rise for the time being. The negative factors for copper futures are not obvious. LME copper is expected to trade between $9,250-9,500/mt in the week of April 15 and SHFE copper prices will fluctuate between 74,500-77,000 yuan/mt. Spot copper is expected to trade with discounts of 200-100 yuan/mt against the SHFE 2405 copper contract.