Copper prices to inch down in August

Copper prices continued to rise in July. Cooling economic data in the US, including the US core PCE price index, the US composite purchasing managers’ index in July and non-farm employment data, triggered market expectations of interest rate cuts by the Fed. This lowered the US dollar index to below the 100 mark, bolstering SHFE copper prices. The European Central Bank raised interest rates by 25 basis points as expected. The euro still restrained the US dollar in July. But the interest rate hike may be paused and the restraint on the US dollar will be reduced. In China, it was proposed for the first time that the real estate industry should adapt to changes in the relationship between supply and demand, adjust and optimise real estate policies in a timely manner, revitalise all kinds of idle real estate, and redevelop urban villages. Subsequent relevant favourable policies issued during the month helped SHFE copper prices rise to the 70,000 yuan/mt mark.

On the fundamental front, the supply of copper concentrate is expected to remain stable. TCs of imported copper concentrate continued to rise in July. Concentrated maintenance at smelters has ended. Stronger demand for copper concentrate driven by the commissioning of brownfield projects at smelters in the second half of the year is expected to weigh on TCs of imported copper concentrate. In July, the limited inflow of imported copper and the exports by some smelters lowered social inventory of copper cathode in China’s mainstream markets. As of August 7, the social inventory of copper cathode across China’s mainstream markets recorded 93,300 mt, and the low inventories underpinned copper prices. The recovery of end-user consumption remained slow. The weekly average operating rates of copper rod plants using copper cathode as raw material dropped noticeably.

Copper prices can still surge in August on the back of positive market sentiment driven by various consumption-stimulating policies. Nonetheless, the weak economic recovery will continue in the short term as the favourable policies will pay off with a lag, limiting the support for copper prices. Market expectations that the Federal Reserve will not raise interest rates within this year grew amid the current weaker economic data in the United States. As the US job market and service industry are still resilient, the US economy is expected to experience a soft landing. Compared with other countries, the US is still attractive for investment. Therefore, the US dollar is expected to rise in the short term, suppressing copper prices. Copper prices will inch down in August. The most active SHFE copper contract prices are expected to move between 67,500-68,500 yuan/mt in August, and LME copper will trade between $8,250-8,450/mt.