The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures rose by 567 tonnes day on day to 140,809 tonnes on February 28, leading to a week-on-week increase of 7,000 tonnes or 5.23%, and an increase of 53,627 tonnes or 61.51% month on month.
The SHFE copper price (main contract) rebounded by Yuan 750/tonne to Yuan 69,050/tonne today and the spot discount in Shanghai market narrowed by Yuan 95/tonne. Without economic data released by China in January and February, copper prices lacked momentum. As US Dollar turns strong again, downward pressure for copper prices on the macroeconomic side remains.
According to Mysteel data released yesterday, refined copper social inventory showed a sign of decline by 500 tonnes while bonded inventory kept increasing by 3,400 tonnes compared with February 23. Usually, the social inventory begins to fall in the fourth week after Chinese New Year, the marginal decrease yesterday cannot prove a great improvement in demand. Inventory data this Thursday should be closely noted.
Mysteel investigated copper bar and copper tube producers recently, producers reflected that the consumption recovery of end users was slower than the market expected in February. However, March is a production peak season for air-conditioners and Mysteel's survey shows that air-conditioner output may reach 11.3 million units in March, rising by 15.8% year on year. As the expectation of demand improvement remains, copper prices may not fall below the current range.
In general, the mismatch between actual demand and macroeconomic recovery expectations, and excessive inventory will hinder the further rise of copper prices. Whether the demand is boosted in March will determine copper prices in short term.
Data Source: SHFE
Data Source: SHFE
Written by Ting Ao, aoting@mysteel.com
Edited by Paula Xu, xuzhongping@mysteel.com