The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell by 301 tonnes day on day to 44,855 tonnes on May 25, leading to a week-on-week decrease of 12,881 tonnes or 22.31%, and a decrease of 13,636 tonnes or 23.31% month on month.
SHFE copper price fell to about Yuan 63,700/tonne today, while premiums of refined copper in East China rose by Yuan 30/tonne today.
Despite US House Speaker McCarthy's claim that progress has been made in negotiations on the debt ceiling, copper prices continued to decline today due to market concerns and inertia, with a minimum of below Yuan 63,000/tonne. According to an economist's deduction, although the current one-year US sovereign CDS (Credit Default Swap) price implies a debt default risk of approximately 3.5%, based on historical experience, Republicans and Democrats in the US will ultimately sign a bill to raise the debt ceiling by $1.5 trillion and reduce appropriate government spending before the deadline. Market participants' concerns about the fat tail risk of potential default risk led to an excessive plunge in copper prices.
On the other hand, according to Nicholas Snowdon, the general manager of Goldman Sachs, copper, as a key raw material for green development, is entering a "super cycle" as its demand will maintain high growth. The long-term shortage of copper supply side investment will lead to an amplification of the copper supply gap. Therefore, long-term demand growth and temporary macro risks are jointly dominating copper prices and the bottom of this round of decline is expected to be higher than before. The continuous depreciation of the CNY exchange rate and the huge back structure of SHFE copper futures will also support copper prices.
In summary, the evolution of overseas macroeconomic factors will still dominate copper prices in the short term, especially before the end of May. Under the influence of risk aversion sentiment, copper prices are expected to remain weak. When the critical moment comes, the risk of significant fluctuations in copper prices needs to be particularly focused on.
Data Source: SHFE
Data Source: SHFE
Written by Edenlis Huang, huangting@mysteel.com
Edited by Ting Ao, aoting@mysteel.com