The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell by 349 tonnes day on day to 42,055 tonnes on June 1, leading to a week-on-week decrease of 2,800 tonnes or 6.24%, and a decrease of 20,276 tonnes or 32.53% month on month.
SHFE copper price rose to about Yuan 65,900/tonne today, while premiums of refined copper in East China rose by Yuan 55/tonne today.
The rise in copper prices today was within expectations, mainly because the US debt ceiling bill was passed by the House of Representatives. The bill will suspend the debt ceiling until early 2025. Additionally, two Federal Reserve officials have pointed out the possibility of suspending interest rate hikes in June. They saw the potential decision to abandon interest rate hikes as an opportunity to evaluate more economic data and may raise interest rates later this summer. Subsequently, according to the FebWatch of CME, the market's expectation of a 25-basis point rate hike by the Federal Reserve in June dropped to 37.8%. The improvement in the macroeconomic situation has increased the risk appetite of market participants and the prices of non-ferrous metals.
Domestic refined copper social inventory continued to decline, while the spot premiums rose, which means that the tightening of spot liquidity in the market. Against the backdrop of still high global inflation and China's central bank's expectation of a 3% CPI this year, it is expected that the recovery in China's CPI will be close. However, the unexpected decline in domestic manufacturing PMI in May, as well as credit tightening and contraction in real demand caused by the Federal Reserve's interest rate hike, will suppress copper demand in the longer term.
In summary, with improved macro expectations, copper prices will rise temporarily. However, the hidden dangers of economic recession and shrinking demand will continue to suppress copper prices in the long term. It is expected that there is limited rising room for copper prices.
Data Source: SHFE
Data Source: SHFE
Written by Edenlis Huang, huangting@mysteel.com
Edited by Ting Ao, aoting@mysteel.com