1.The Market Is Still Influenced By The Easing Sentiment Of US Inflation, And Copper Prices Are Running Strong.

Last Friday evening, LME copper opened at $8,648.5 per tonne. After an initial fluctuation and upward movement, it fell to a low of $8,656 per tonne. During the trading session, it experienced wide fluctuations and reached a high of $8,695 per tonne. Finally, it closed at $8,671 per tonne, with a trading volume of 20,000 tonnes and an open interest of 272,000 tonnes, representing a decrease of 0.41%. The main Shanghai copper contract, 2308, opened at 69,480 yuan per tonne. It initially fluctuated downward to a low of 69,230 yuan per tonne, then rebounded and reached a high of 69,540 yuan per tonne during the trading session. Finally, it closed at 69,380 yuan per tonne, with a trading volume of 31,000 lots and an open interest of 205,000 lots, representing a decrease of 0.1%. In terms of macroeconomic factors, as inflation softens, the Federal Reserve is believed to be nearing the end of its rate hike cycle.

Last week, the US dollar hit its largest weekly decline since November against a basket of six major currencies. In terms of fundamentals, as of last Friday, July 14th, copper inventories in major regions across China decreased by 8,600 tonnes compared to the previous Monday, reaching 117,000 tonnes, a decrease of 3,300 tonnes compared to the previous Friday. Specifically, the Shanghai region showed a decrease in inventories, mainly due to a year-on-year decrease in imported copper and spot discounts, which provided purchasing opportunities for some downstream manufacturers. On the other hand, Guangdong region showed an increase in inventories, mainly due to increased deliveries from surrounding smelters approaching the delivery week. In terms of consumption, the high copper prices have put pressure on demand, but if the focus shifts lower after the contract rollover, demand is expected to increase.

As for prices, it is widely expected that the Federal Reserve's tightening policy is entering its final phase, and it is predicted that copper prices will remain at high levels in the near term.

 

 

 

2. Copper Market Morning Comment

In terms of macroeconomics, US retail sales for June recorded a growth rate of 0.2%, marking the third consecutive month of growth. However, it fell below the expected growth rate of 0.5%. The market expects the Federal Reserve to raise interest rates by 25 basis points next week, but the rate decision is still pending. In terms of fundamentals, after the contract rollover, the center of gravity for copper prices has shifted slightly downward. Some downstream companies in East China have shown an increased willingness to replenish stocks. However, high inventories have made it difficult for holders to have confidence in supporting prices. Overall, the trading volume has slightly improved compared to last week. In the southern region, inventories have increased slightly, but the purchasing enthusiasm of downstream buyers has not improved due to the decline in copper prices. The spot market trading is not active, and the premium has been continuously declining.

In terms of consumption, downstream demand has only slightly improved after the contract rollover, and the market still finds it difficult to accept the current high copper prices. In terms of prices, the market is awaiting the interest rate decision, and copper prices are expected to remain in a high range of fluctuations in the near future.

 

 

 

 

 

 

 

 

 

 

 

 

 

3. US June PPI falls more than expected, overnight copper surges again 

Overnight, LME copper opened lower at $8,566.5 per tonne, then rose steadily to touch a high of $8,710 per tonne during the session. It ended the day with sideways consolidation at $8,707 per tonne, with a trading volume of 26,000 lots and an open interest of 264,000 lots, resulting in a 2.27% increase. The main SHFE copper contract, 2308, opened lower at 68,970 yuan per tonne, experienced initial volatility and then rose to a high of 69,730 yuan per tonne during the session. It later consolidated sideways and closed at 69,580 yuan per tonne, with a trading volume of 47,000 lots and an open interest of 203,000 lots, resulting in a 1.65% increase.

In terms of macroeconomics, the U.S. June PPI unexpectedly dropped, recording a 0.1% decline in both the annual and monthly rates. The annual rate was the lowest in three years, providing further evidence of inflation cooling down in the United States. However, San Francisco Fed President Daly stated that it is still too early to declare that the inflation issue has been resolved, and sufficient measures must be taken to raise interest rates to a sufficiently tight level. In terms of fundamentals, the Eastern China region is still influenced by the strong backwardation guidance as delivery approaches, and imported copper continues to flow in. Spot premiums fluctuate around zero. Inventories in South China have decreased, with limited arrivals and withdrawals, and the backwardation has not narrowed. In addition to the surge in copper prices, downstream purchasing intentions are low. Despite some price reductions from holders, actual transactions are not active. Regarding consumption, rising copper prices are suppressing demand, and downstream purchasing intentions are low before delivery. It is expected that there will be some improvement after the delivery. In terms of prices, influenced by macro sentiment, the market has high expectations that the Fed will end its tightening policy, which provides momentum for copper prices to run at high levels.

 

 

 

 

 

4. Copper Prices Still Range-Bound; UK CPI Data Below Market Expectations

On July 20th, the overnight copper price on the London Metal Exchange (LME) opened at $8,382 per tonne. It initially declined to touch a low of $8,361 per tonne, but then steadily rose throughout the session. After a brief pullback, it climbed again, and by the end of the session, it consolidated sideways and touched a high of $8,434.5 per tonne, ultimately closing at $8,432.5 per tonne. Trading volume reached 16,000 lots, and open interest stood at 267,000 lots, with a decline of 0.34%.

Meanwhile, the overnight copper main contract (2308) on the Shanghai Futures Exchange (SHFE) opened at 68,450 yuan per tonne. After experiencing some initial volatility, it declined and touched a low of 68,340 yuan per tonne during the session. However, it rebounded and consolidated sideways towards the end, reaching a high of 68,600 yuan per tonne before closing at 68,560 yuan per tonne. Trading volume reached 24,000 lots, and open interest stood at 171,000 lots, with a rise of 0.13%.

On the macroeconomic front, the UK's Consumer Price Index (CPI) for June, released on Wednesday, fell to a more than one-year low year-on-year. This led to a significant drop in the pound sterling against other major currencies, causing a rebound in the US Dollar Index (DXY). In the United States, no major data was released, and the market is anxiously awaiting the results of the upcoming Federal Reserve interest rate meeting next week.

Regarding fundamentals, the spot premiums in East China declined throughout the day. Although the copper price's center of gravity has shifted slightly downward, the limited demand during the off-season has resulted in inventory accumulation among traders. Despite offering discounts, overall trading activity remains subdued. In South China, the premiums also decreased due to weak consumption. While traders are active in destocking due to narrowing contango spreads, downstream willingness to accept the material is low. As for consumption, if copper prices continue to remain high, downstream companies will only maintain just-in-time restocking, making it difficult to see any improvement in the short term.

In terms of prices, the market is waiting for the US interest rate meeting. Recently, copper prices have remained relatively high and range-bound.

 

 

5.Copper Inventory across China Major Markets Accumulated  

As of Monday, July 17, copper stocks in mainstream SMM regions across the country increased by 8,400 mt to 125,400 mt from last Friday. Copper inventories grew across Guangdong, Jiangsu, and Tianjin, up by 1,500 mt, 3,200 mt, 2,700 mt, and 1,000 mt respectively, while the stocks in other regions remained unchanged.

Copper prices have stabilized at a high level. This combined with the delivery of the SHFE July copper contract, dampened spot consumption. Low shipments leaving warehouses and increasing arriving shipments from delivered cargoes accounted for the inventory grow in Shanghai, Guangdong, and Jiangsu.

During the week, as the delivery cycle of the Shanghai Copper 2307 contract has not yet ended, the supply of spot circulation is relatively tight. However, the current stockpiling situation is difficult to give spot traders confidence.