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Today, spot premiums of #1 copper cathode moved between 50-80 yuan/mt over the SHFE 2310 copper contract, and the average premium was 65 yuan/mt, up 10 yuan/mt from yesterday. The traded prices of standard-quality copper were 68660~68760 yuan/mt, and the high-quality copper was traded at 68670~68780 yuan/mt. The U.S. dollar index surged above 105.5, and copper futures fell sharply in the morning trading. The SHFE 2310 copper contract was mainly traded at 68600-68720 yuan/mt in the morning trading, closing at 68630 yuan/mt. The price spread between the SHFE front-month and next-month copper contracts narrowed to 160-180 yuan/mt.
Copper prices fell below 69,000 yuan/mt, and downstream stocking increased. The imported copper arriving in the first half of the week was gradually digested, and low-priced supplies in Changzhou were actively purchased. During the day, spot premiums in Shanghai stabilized at over 50 yuan/mt, and the sellers of hydro-copper were unwilling to sell with discounts. The market demand for non-registered goods has increased, but the supply did not improve. In the morning, premiums of mainstream standard-quality copper were 50-60 yuan/mt, and those of high-quality copper stood at 70-80 yuan/mt. Premiums of hydro-copper were around 20 yuan/mt. Entering the mainstream trading period, mainstream standard-quality copper was traded at a premium of 50-60 yuan/mt. Premium of high-quality copper, such as Jinchuan plate, dropped to 60 yuan/mt. The transaction was brisk.
Today is the last day of the copper industry-related conference. Most of the copper market participants are on their way back, market trading activity was also low. Spot traded prices stabilized. Spot activity may increase tomorrow, and spot transactions will also be boosted by downstream stocking operations.
LME copper prices opened at $8327.5/mt and closed at $8337.5/mt in overnight trading, a gain of 0.34%, with the low-end of $8318.5/mt and the high-end of $8384/mt. Trading volume was 14,000 lots, and open interest stood at 260,000 lots. The most active SHFE 2310 copper contract prices opened at 68890 yuan/mt and closed at 68920 yuan/mt last evening, up 0.23%, with the high-end of 69110 yuan/mt and the low-end of 68810 yuan/mt. Trading volumes stood at 15,000 lots and open interest stood at 127,000 lots.
On the macro front, the Federal Reserve kept interest rates unchanged in the range of 5.25-5.5%. In terms of fundamentals, there were still inflows of imported copper. And the market expects warehouse receipts to gradually enter the spot market. The spot quotes in East China were still under pressure yesterday. However, as the copper prices shifted downward, downstream purchasing gradually increased.
Inventories in South China declined yesterday, and stockholders raised prices, but downstream buyers purchased as required. Overall transactions were inactive. The decline in copper prices will stimulate downstream sentiment to prepare stocks in advance for the National Day holidays. It is expected that the upward space for copper prices will be limited in the near future.
Copper prices were at a high level in early August on the back of a series of positive macroeconomic policies. Fitch lowered the credit rating of the US, pushing down global share price index futures. In addition, the United States released the core PCE price index and the job market cooled as expected. The market expectations for a soft landing in the United States have gradually increased. The US dollar remained strong, pressuring copper prices. The continued decrease in overseas demand, coupled with weak domestic demand, undermined market confidence in the Chinese economy. As such, copper prices continued to fall, and once dropped to the 67,000 yuan/mt mark.
In the second half of August, the Chinese government once again released a string of favourable macroeconomic policies to stimulate the domestic demand, including the further cut in the Medium-Term Lending Facility Rate in a bid to increase liquidity. 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 refinancing of listed real estate companies is not restricted even if their stocks prices fall below the issue prices or the net asset value per share, or even if they incur losses. Subsequently, first-tier cities including Beijing, Shanghai, Guangzhou and Shenzhen 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 is aimed at boosting the real estate consumption. The market sentiment thus improved, pushing up the most active SHFE copper contract prices to the 70,500 yuan/mt mark.
Fundamentally, the copper concentrate supply is expected to be adequate. But spot TCs should fall in the near term. Smelters will restock inventories for production in winter before the negotiations on the benchmark TC of long-term contracts in 2024 start. China's copper cathode output in August was 989,000 mt, an increase of 63,100 mt or 6.8% month-on-month, and a growth of 15.5% year-on-year. As of September 11, the social inventory of copper cathode across China’s mainstream markets stood at a low level of 88,600 mt, underpinning copper prices. Downstream consumption still shows strong resilience as the operating rates of copper semis producers improved significantly when copper prices fell.
A barrage of favourable policies for the real estate sector in September bolstered market confidence. Informal financing data topped expectations, and credit growth is expected to remain strong. China's economy is expected to rebound. As such, copper prices will have impetus to rise. On the other hand, the U.S. economy remains resilient after multiple rounds of interest rate hikes. The job market and inflation rate are gradually cooling. Market expectations for a soft landing for the U.S. economy have increased. The U.S. dollar will remain strong in the near term. This will cap gains in copper prices. The most active SHFE copper contract prices are expected to move between 67,500-70,000/mt in the near term, and LME copper will trade between $8,150-8,400/mt.
The operating rates of copper foil enterprises stood at 85.33% in August, up 3.11 percentage points month on month but down 0.86 percentage point year on year. The average operating rate of large, medium-scale and small enterprises stood at 87.03%, 83.65% and 81.35%, respectively.
The average operating rate of electronic circuit copper foil stood at 85.35%, up 9.02 percentage points on the month. That at lithium battery copper foil enterprises stood at 85.57%, down 0.36 percentage point. Average operating rate estimated at 87.83% in September. (Notes: SMM surveyed 36 producers with a combined capacity of 1.25 million mt/year.)
The growth in operating rates of copper foil plants in August was mainly driven by the continued rebound in new orders in the electronic circuit copper foil industry. End-user consumption of electronic circuit copper foil continued to pick up slightly, with the sentiment in the printed circuit board market rebounding. And inventories in the upstream and downstream of the industry chain were gradually digested. New orders of the automotive electronics industry and server industry, which have long been supported by policies, were stable.
The operating rates of copper rod plants using copper scrap were 44.65% between September 8 and September 14, a rise of 3.71 percentage points from a week ago, according to SMM survey of 15 plants with a capacity of 1.48 million mt/year). One of the copper rod plants using copper scrap as raw material in the survey sample completed maintenance and restarted production last week, bolstering the average operating rate. Excluding this plant, the operating rate declined slightly last week.
On the supply side, as copper prices failed to stay above 69,500 yuan/mt, the enthusiasm of traders for selling copper scrap weakened. Last week, the price spread between copper cathode and copper scrap stayed below the advantageous level of 1,000 yuan/mt for scrap users until Thursday. Most copper rod plants using copper scrap as raw material reported low access to raw materials compared with a week earlier amid tight copper scrap supply. The order delivery period stood at up to around seven days.
On the consumption side, copper rod plants using copper scrap as raw material raised prices due to the tight supply of copper scrap. Discounts of copper rod produced with copper scrap did not exceed 300 yuan/mt during the week and mainly stood at around 150 yuan/mt, with no economic benefits. As of Thursday September 14, the price spread between copper rod produced with copper cathode and with copper scrap stood at 785 yuan/mt, which was below the advantageous level for the users of copper rod produced with copper scrap.