The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell by 775 tonnes day on day to 26,502 tonnes on June 14, leading to a week-on-week decrease of 11,086 tonnes or 29.49%, and a decrease of 35,019 tonnes or 56.92% month on month.
SHFE copper price rose to about Yuan 67,800/tonne today, while premiums of refined copper in East China fell by Yuan 160/tonne.
SHFE and LME (London Metal Exchange) copper prices rose sharply again today, mainly boosted by the improved macroeconomic situation. The US CPI increased by 4% year on year and 0.1% month on month in May, lower than market expectations. Affected by this factor, the market's expectation of the Federal Reserve to skip the rate hike in June was close to 100%, and the probability of a cumulative 25 basis point rate hike by July reached about 60%.
The 7-day reverse repurchase rate of the People's Bank of China has been lowered from 2% to 1.9%, leading to market expectations that the Medium term Lending Facility (MLF) rate will also be lowered by 10 basis points. Due to the strong financial attributes of copper, the easing of macro money supply expectation has a more significant stimulating effect on copper prices.
The continuous rise in copper prices has suppressed the demand for refined copper from downstream enterprises in China. On the other hand, the substitution effect of secondary copper is gradually being embodied. According to Mysteel's survey, some traders and end-users purchased an appropriate amount of secondary copper semis this week.
As the contract rolling is approaching, the premiums of refined copper in China fell sharply, indicating weakened demand. There is a risk that centralized delivery may lead to a drop in copper prices.
In summary, the current market has fully fulfilled bullish macroeconomic expectations, which will increase the risk of a decline in copper prices. Fundamental factors are expected to drive copper prices after macro risks are fully released.
Data Source: SHFE
Data Source: SHFE
Written by Edenlis Huang, huangting@mysteel.com
Edited by Ting Ao, aoting@mysteel.com