1.Domestic positive comments and supply concerns push copper prices to an 18-year high

LME copper prices opened at $9804/mt and closed at $9874.5/mt last Friday, a rise of 1.35%, with the low-end of $9793.5/mt and the high-end of $9913.5/mt. Trading volume was 34,000 lots, and open interest stood at 335,000 lots. The most active SHFE 2102 contract prices opened at 79700 yuan/mt and closed at 80080 yuan/mt last Friday evening, up 1.39%, with the high-end of 80170 yuan/mt and the low-end of 79450 yuan/mt. Trading volumes stood at 97,000 lots and open interest stood at 213,000 lots. On the macro level, Zhu Hexin, deputy governor of the People's Bank of China, recently stated at a press conference held by the State Information Office that a series of monetary policies implemented earlier this year are gradually taking effect. There is still room for monetary policy in the future. The next step will be to closely observe the policy effects, economic recovery and goal achievement. At the same time, there were many positive remarks during the press conference and the recent World Bank Development Committee and IMFC meetings, which pushed copper prices higher. In addition, concerns about copper supply have increased, and driven by large-scale purchases by funds, SHFE copper has hit a new high since 2006. The increasingly tense geopolitical conflicts have also played a certain role in raising copper prices. In terms of fundamentals, from the supply side, as the export window opens, many domestic smelters have increased their export efforts, which may lead to a certain reduction in supply. In terms of consumption, copper prices hit an 18-year high, and downstream consumption is expected to be suppressed again due to financial pressure. On the whole, copper mines in many places have been reported to have stopped production recently. At the same time, some smelters in the Congo-Zambia region are facing suspension of production due to the hydropower crisis. Supply concerns may ferment again, and copper prices are expected to remain high.

2.Copper rod plants using copper scrap as raw material stopped production

The average operating rate of copper rod plants using copper scrap was 31.76%, a drop of 17.44 percentage points from a week earlier, according to survey of 15 plants with a capacity of 1.59 million mt/year.

The average price spread between copper rod made using copper cathode and using copper scrap expanded 280 yuan/mt and stood at 2,333 yuan/mt. In the week ending April 19, SHFE copper prices further surged driven by LME copper prices prices. The discount of copper rod made from copper scrap against SHFE copper prices was 1,927 yuan/mt, while the processing fee for anode plates was 850 yuan/mt. As the sales profit of anode plates was nearly 1,000 yuan/mt higher than that of copper rod made from copper scrap, copper rod plants using copper scrap as raw material currently produce anode plates five days a week. Copper rod plants using copper scrap as raw material without anode plate production capacity stopped production.

Since March, the output of anode plates has been increasing. The smelters reported that the inventory of anode plates can meet the factory production until mid-May and limited the purchase of anode plates. Some copper rod plants sold anode plates with a processing fee of about 1,100 yuan/mt. Most of copper rod plants using copper scrap could sustain their production of anode plates for 2-3 days with existing inventories.

As the holiday approaches, downstream cable companies will have the need to replenish their inventory of raw materials. If the orders increase, copper rod plants using copper scrap as raw material will still produce copper rods. It is expected that the average operating rate will pick up slightly in the week of April 22.

3. Copper futures prices broke through previous high amid falling US dollar

LME copper prices briefly surged and then fell back on the heels of the restrictions imposed by the UK and the US on Russian metals trading. SHFE copper prices did not rise sharply after opening in the week ending April 19. On Monday, the US retail sales rate for March was 0.7% month-on-month, exceeding market expectations of 0.3%. The Federal Reserve is "not in a hurry to cut interest rates this year". The US dollar received strong support and broke through 106 before hitting a high of 106.5. Although it subsequently gave up some of its gains, it was still hovering around 106. The Beige Book showed that the US economy has "expanded slightly" since the end of February, and consumers are still very sensitive to prices; however, the economic situation released in the Beige Book seems to be inconsistent with the actual data released by the US earlier. The market is still concerned about whether the US economy can smoothly achieve a soft landing. In the second half of the week, the US dollar gave up its gains and fell below 106. Luis de Guindos, a member of the European Central Bank's Executive Board, said that further declines in inflation would support interest rate cuts this year and the probability of a rate cut by the ECB in June increased; the euro fell significantly against the US dollar during the week and rebounded slightly in the second half of the week.

In the Chinese market, China's annualised GDP in the first quarter recorded 5.3%, and China's annualised total retail sales of consumer goods in March increased by 3.1%. The GDP in the first quarter was mainly driven by the improvement of industry and services, and both domestic and overseas demand showed a significant rebound. The steady improvement of the domestic economy is beneficial to the domestic macro sentiment. On April 18, the People's Bank of China (PBOC) responded to the recent fluctuations in the RMB exchange rate and stated that there is still room for future monetary policy, improving market confidence; A-shares hit 3,100 during the day. Copper prices also hit new highs driven by macroeconomic factors. LME copper prices broke through $9,700/mt and SHFE copper prices exceeded 78,000 yuan/mt.

On the fundamentals, the tight ore supply and the downward trend of TCs continued. The high copper price has reduced new orders for copper processing companies. The large spot discounts remained in mid-to-late April, and SMM data showed that China's copper cathode social inventory was still increasing. With the recent opening of the copper cathode export window, smelters have actively exported, which has increased bonded area inventories and thus reduced domestic supply to a certain extent. However, after the delivery of the SHFE 2404 copper contract, SHFE still has a high volume of futures warehouse warrants. Spot traders are still under pressure.

In the week of April 22, PMI data from many countries and PCE data from the US will be released, and the Bank of Japan will announce its interest rate decision and outlook report. There are no obvious signs of a correction in copper contract prices. It is expected that in the week of April 22, LME copper prices will trade at $9,500-9,850/mt, and SHFE copper prices will trade at 77,000-79,550 yuan/mt. Spot trades will remain poor under the influence of high copper prices, and the spot discounts are expected to be 250-150 yuan/mt.

4.European Central Bank said it will cut interest rates soon, copper prices fell overnight

LME copper prices opened at $9463/mt and closed with a drop of 0.98% at $9474.5mt last evening the low-end of $9412/mt and the high-end of $9495/mt. Trading volume stood at 27,000 lots. Open interest stood at 334,000 lots.

The most active SHFE 2406 copper contract prices opened at 76460 yuan/mt and finished at 76710 yuan/mt last evening, down 0.51%, with the low-end of 76310 yuan/mt and the high-end of 76740 yuan/mt. Trading volume was 49,000 lots, and open interest stood at 198,000 lots. On the macro level, European Central Bank President Christine Lagarde said that interest rates will be cut soon. ECB board member Villeroy also said that the ECB will cut interest rates as early as June 6. The US dollar index rose, which was bearish for copper prices. In terms of fundamentals, from the supply side, copper prices fluctuated at highs. Many refineries and traders had large amount of inventories, but were unwilling to lower prices sharply. In terms of consumption, high market prices continue to suppress demand. Except for on-demand purchases, most downstream companies are not very motivated to purchase. Spot trading was subdued. In terms of price, Europe and the United States will release a lot of economic data in the near future, and the probability of the US dollar index rising is relatively high. It is expected that there will be limited upward space for copper prices.

5.Copper inventories in the domestic bonded zones increased

Copper inventories in the domestic bonded zones increased 6,600 mt from April 3 to 70,400 mt as of Thursday April 11, according to the latest survey. Copper inventories in the Shanghai bonded zone added 6,300 mt to 66,600 mt, and inventories in the Guangdong bonded zone advanced 300 mt to 3,800 mt. The increase in bonded inventory in the week ending April 12 was driven by the exported cargoes by domestic smelters. Some mainstream smelters still have plans to export to bonded areas. Shipments under warrants from bonded zone inventories were hampered amid the weak SHFE/LME copper price ratio. And bonded inventory is expected to accumulate.