The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell 2,632 tonnes day on day to 28,082 tonnes on October 28, leading to a week-on-week plunge of 24,205 tonnes or 46.29%, and a surge of 24,078 tonnes or 601.35% month on month.
The London Metal Exchange (LME) copper led the SHFE copper price to rise last night but peaked back down today. The US reported a return to GDP growth quarter on quarter in the third quarter, which led to reduced recession expectations in the market but also increased the likelihood that the Federal Reserve will continue to aggressively hike interest rates. So, the US dollar index stabilized and then rallied. Towards the end of the year, the market began to pay attention to various macro factors, among which the real estate problem is still the key factor. The Fed's November meeting is just around the corner, leading to greater short-term macro factors' uncertainty. But the market is also looking forward to the recovery of macro sentiment after the negatives are all over. Coupled with the high level of the US dollar index and the larger possibility of a correction, copper prices are expected to rebound in the short term.
However, the weak and uncertain fundamentals of copper in China, coupled with the potential for a policy-guided pullback in the exchange rate, will result in a weaker price trend for SHFE copper compared to LME copper. Finally, the final results of the LME's sanctions against Russian metals are likely to be announced in the near future, which could cause sharp price swings. Therefore, companies hedging on the LME need to pay special attention to cash flow pressures.
The conclusion is that the recent easing of monetary tightening expectations, coupled with tight copper supply, led to an unexpected rise in prices. However, considering the overall economic situation, excessive optimism should not be warranted. The pressure level in SHFE copper is Yuan 65,000-66,000/tonne, and the bottom level is Yuan 56,000-58,000/tonne. There is strong support around the 90-percentile copper cost in the extreme case, which is Yuan 53,000/tonne. It is still recommended to mainly short at a high price.
Data Source: SHFE
Data Source: SHFE
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