The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell by 2,368 tonnes day on day to 114,990 tonnes on March 14, leading to a week-on-week decrease of 20,111 tonnes or 14.89%, and an increase of 906 tonnes or 0.79% month on month.
SHFE copper price fell to about Yuan 68,550/tonne today and premiums of refined copper in Shanghai market fell by Yuan 20/tonne from yesterday. The sudden drop in copper prices was mainly due to the market panic caused by the successive bankruptcies of Silicon Valley Bank and Signature Bank in the US. Bank stocks in the US plunged last night, with the largest drop of 70%. The risk of the financial crisis led the market to expect that the Federal Reserve would raise interest rates more cautiously, so it was interpreted as a potentially bullish signal. However, copper prices fell temporarily due to the risk aversion of market participants.
Relative to overseas systemic risks, China's copper demand is stable. In February, the scale of new social financing in China increased by Yuan 1,943 billion year on year to Yuan 3.16 trillion, while the M2 in February only increased by Yuan 545 billion year on year to Yuan 1.81 trillion. The narrowing of the growth margin between M2 and social financing means that the improvement of the real economy will drive a substantial increase in copper demand. According to Mysteel's data released yesterday, refined copper social inventory fell by 47,200 tonnes week on week to 261,400 tonnes, indicating the strong recovery of copper consumption.
To sum up, the temporary decline caused by short-term risk aversion will be repaired by the lower expectation of interest rate increase and the continuous improvement of China's demand. It is expected that the copper price will still fluctuate in the current range in the short term.
Data Source: SHFE
Data Source: SHFE
Written by Edenlis Huang, huangting@mysteel.com
Edited by Ting Ao, aoting@mysteel.com