SMM forecast for copper market this week

In China, the Ministry of Finance, the China Securities Regulatory Commission, and the three major exchanges all announced major policy adjustments, including those to stamp duty policies, IPO, refinancing, financing, and reduction of shareholding. The listed real estate companies will not be restricted in refinancing even if their stocks prices fall below the issue prices or the net asset value per share, or even if they incur losses. In addition, during the week, many Chinese cities officially announced that mortgages will be treated in the same way as a first mortgage for a buyer who does not have any house locally, regardless of whether the buyer has already bought any house in other regions of China. This further boosted domestic consumption.

Overseas, the United States revised down its second-quarter GDP to 2.1% from the previous 2.4%. This lowered the market expectations for US inflation. On the other hand, the limited downward revision shows that the US economy is still resilient and expectations for a soft economic landing are strong. ADP reported that the US added 177,000 new jobs in August, the smallest increase in five months and less than the expected 195,000. The cooling US job market undermined the credibility of Fed Chair Powell's suggestion at the global central bank annual meeting that the US may raise interest rates once more this year. In the eurozone, the economic sentiment indicator and consumer confidence index for August released last week showed that economic confidence in the eurozone deteriorated and that the eurozone economy may stagnate this quarter. Slightly higher-than-expected inflation rates in Germany and Spain due to rising energy prices raised the possibility that the European Central Bank will raise interest rates again in September. Fundamentally, the gains in copper prices dampened downstream consumers' purchasing interests last week, limiting new orders. Nonetheless, copper inventories in major markets of China standing at a record low still supported copper prices to a certain extent.

As domestic demand is still weak, the favourable domestic policies are unlikely to drive a significant increase in copper prices. The US dollar index is unlikely to fall sharply in the short term, limiting the upside room for copper prices. In view of the low copper inventories, the resilient domestic economy and the upcoming peak season from September to October, SHFE copper prices are expected to move between 68,000-70,000 yuan/mt this week, and LME copper prices will stand at $8,300-8,450/mt. In China's domestic spot market, spot premiums will rise to 300-600 yuan/mt this week even with the pressure from imported cargoes.