1.copper morning comment

LME copper prices opened at $7959/mt and closed at $7940/mt last Friday, a drop of 0.88%, with the low-end of $7930.5/mt and the high-end of $7985.5/mt. Trading volume was 17,000 lots, and open interest stood at 268,000 lots. The most active SHFE 2311 copper contract prices opened at 66190 yuan/mt and finished at 66310 yuan/mt last Friday evening, down 0.23%, with the low-end of 66230 yuan/mt and the high-end of 66470 yuan/mt. Trading volume was 16,000 lots, and open interest stood at 119,000 lots.

On the macro front, Fed Bostic believes the Fed will not cut interest rates before the middle of next year. The end of 2024 may be the time for the Federal Reserve to cut interest rates. SMM data showed that as of Friday October 20, copper inventory across major Chinese markets stood at 95,300 mt, down 18,800 mt from last Monday and down 22,000 mt from two Fridays ago. Specifically, acceptable downstream demand in East China and some supplies being transferred to South China, resulted in a decrease in inventory in East China. Demand in South China also showed strong performance, and inventories fell. In terms of consumption, companies are still scheduling production orders, and demand is expected to remain strong. In terms of price, copper prices are expected to remain relatively low in the near future.

 

 

 

 

 

 

 

 

 

 

2. Copper prices rebounded slightly as market expected Fed to keep interest rate unchanged

LME copper prices opened at $8020/mt and closed at $7992/mt in overnight trading, a gain of 0.39%, with the low-end of $7965/mt and the high-end of $8048.5/mt. Trading volume was 17,000 lots, and open interest stood at 268,000 lots. The most active SHFE 2311 copper contract prices opened at 66620 yuan/mt and finished at 66500 yuan/mt last evening, up 0.02%, with the low-end of 66380 yuan/mt and the high-end of 66780 yuan/mt. Trading volume was 17,000 lots, and open interest stood at 138,000 lots.

On the macro front, the U.S. housing starts data released on Wednesday, though lower than expected, exceeded the previous value. In addition, Federal Reserve Governor Waller changed his tone and said that the Federal Reserve may need to continue to raise interest rates, but hinted that it supports staying on hold, and the U.S. dollar index rose. In terms of fundamentals, the overall market transactions in East China were relatively active yesterday, and the premiums rose accordingly. In addition, the warrants have not yet flowed into the market and are expected to gradually be offered for sale in the next two days. Inventories in South China have increased, and rising copper prices have reduced enthusiasm for transactions. But sellers still kept prices firm. On the consumption side, demand is expected to remain strong in the near term. Copper prices will weaken due to unstable market sentiment and high US dollar index.

 

 

 

 

 

 

 

 

 

 

3. Lower copper prices boosted consumption of copper semis

The average operating rate of key copper rod plants using copper cathode as raw material was 82.75% (October 6-12), an increase of 3.37 percentage points from the previous week. In the first week after the National Day holidays, the consumption of copper rod produced with copper cathode exceeded expectations. According to the survey, most copper rod plants using copper cathode as raw material resumed normal production on October 6, with little impact on the operating rates.

As copper prices fell two Mondays ago, downstream purchasing continued to pick up, with order volume and delivery speed both performing well. According to feedback from some copper rod plants using copper cathode as raw material, orders from downstream cables and enamelled wires increased, and there was even a "surge in orders" during the week. As some copper rod plants suspended production during the holidays, finished product inventories were at a low level. Amid surging downstream orders after the holidays, some copper rod plants using copper cathode as raw material reached full production capacity to meet downstream delivery-taking needs. The narrower price spread between copper rod produced with copper cathode and with copper scrap boosted consumption of copper rod produced with copper cathode. According to SMM data, the price difference shrank to a minimum of 275 yuan/mt two weeks ago. The shortages of copper scrap supply also tightened available spot copper rod produced with copper scrap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. Operating rates of copper rods plants using copper scrap plummeted on tight copper scrap supply

The operating rates of copper rod plants using copper scrap were 31.67% between October 6 and October 12, a drop of 9.49 percentage points from a week earlier, according to SMM survey of 15 plants with a capacity of 1.48 million mt/year. Operating rates of copper rods plants using copper scrap plunged as copper scrap supply failed to improve.

On the supply side, copper prices after the holidays were at the lowest level in the third quarter, and suppliers of copper scrap refrained from selling their cargoes. The copper rod plants using copper scrap as raw material did not restock enough copper scrap before the holidays, closing longer for the Mid-Autumn Festival and National Day holidays this year than in previous years. According to SMM survey, the current raw material inventory of some copper rod plants using copper scrap as raw material cannot even guarantee continuous production.

On the consumer side, due to the high price of copper scrap, the price of copper rod produced with copper scrap stayed above SHFE copper prices. As of Thursday October 12, the price spread between copper rod produced with copper cathode and with copper scrap recorded 275 yuan/mt. The diminishing economic benefit reduced the impact on copper rod produced with copper cathode. Downstream wire and cable factories purchased aggressively, keeping supply of copper rod produced with copper cathode and with copper scrap tight. The demand for copper rod produced with copper scrap did not drop significantly last week.

Copper prices may return to the upward channel in the coming week. Therefore, the shipments by traders of copper scrap may be boosted, easing the tight supply of copper scrap. Hence the operating rates of copper rod plants using copper scrap as raw material will increase.

 

 

 

 

 

 

 

 

 

 

5. Sluggish copper concentrate spot transactions during holidays, spot TCs to still have room for decline in the fourth quarter

As of September 28, the SMM Imported Copper Concentrate Index (Weekly) stood at $93.23/mt, $0.59/mt lower than a week earlier. During the National Day holidays, there was still a small amount of trades in the copper concentrate market. The price coefficient of Cu 20% domestic ore stood at 88.5-89.5%.

Chinese holidays combined with the LME Week muted the spot trading of copper concentrate in China. During the holidays, a smelter in north China purchased Peruvian clean ore with TCs in the mid-to-low $90s, with the loading scheduled from late November to early December. The current traded TCs of clean ore scheduled for the fourth quarter between mines and smelters are in the high $80s. According to market participants, there were rumours at the LME Week that some Chinese smelters underwent shortages of raw materials and were making inquiries aggressively. Sellers generally expected that Chinese smleters’ raw material inventory would be relatively tight in the fourth quarter. But according to SMM survey, raw material inventory at a smelter in north China that commissioned an capacity expansion project was ample, with concentrated arriving shipments of both domestic and seaborne copper concentrate.

According to SMM analysis, demand for spot copper concentrate from some Chinese smelters, especially smelters in the north-west, will increase in the fourth quarter due to production in winter and new production capacity. But this growth in demand will be within a reasonable range. On the supply side, the "armed protection period" of the Las Bambas copper mine has expired again and other disruptive factors to South American mines occur periodically. Therefore, we expect there is downside room for spot copper concentrate TCs in the fourth quarter. Copper concentrate inventories across seven major ports in China stood at 953,000 mt on September 28, down 19,500 mt from a week earlier.