The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell by 5,925 tonnes day on day to 22,278 tonnes on June 21, leading to a week-on-week decrease of 4,224 tonnes or 15.94%, and a decrease of 23,680 tonnes or 51.53% month on month.
SHFE copper price remained stable at about Yuan 68,500/tonne today, while premiums of refined copper in East China fell by Yuan 180/tonne.
According to the National Institution for Finance & Development (NIFD), China's macro leverage ratio increased by 8.6 percentage points quarter-on-quarter to 281.8% in the first quarter of 2023, with non-financial enterprises providing the main increase. Combined with the optimization of China's epidemic control measures, copper prices rose again to over Yuan 70,000/tonne in the first quarter.
Despite the current relaxation of China's monetary policy, it is expected that the boosting of market optimism will not reach the level of that in the first quarter. Copper prices will face enormous pressure at around Yuan 70,000/tonne, further increasing the risk of a plunge.
Although the Federal Reserve announced this week that it expects to raise interest rates twice more this year, market participants generally do not recognize this and have pushed up asset prices, including copper, with an overly optimistic attitude. However, due to the time lag of interest rate policies, the inhibitory effect of still high financing costs on copper prices will gradually be reflected.
Although China's refined copper social inventory fell another 10,900 tonnes to 84,900 tonnes week on week today, high copper prices have begun to suppress downstream enterprises' purchasing willingness. According to Mysteel's survey, it is expected that LME's cancelled warrants spots will gradually arrive in China from early July, which will alleviate supply pressure.
In the context of the high LME copper cancelled warranties proportion, it is expected that domestic spot supply will be looser in the short term, thereby suppressing copper prices. The narrowed import losses this week are also expected to improve the supply of imported copper. After consecutive rises in copper prices, the risk of a decline caused by high overseas interest rates and excessively high asset pricing needs to be paid attention to.
Data Source: SHFE
Data Source: SHFE
Written by Edenlis Huang, huangting@mysteel.com
Edited by Ting Ao, aoting@mysteel.com