The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell by 299 tonnes day on day to 18,456 tonnes on October 17, leading to a week-on-week increase of 12,931 tonnes or 234.05%, and an increase of 4,855 tonnes or 35.7% month on month.
SHFE copper price fell to about Yuan 65,900/tonne today, while premiums of refined copper in East China fell by Yuan 25/tonne.
The recent dovish views of Federal Reserve officials have brought partial optimism to the market. Federal Reserve Bank of Chicago Chairman Goolsbee believes that the decline in inflation will be a long-term trend. The Chairman of the Philadelphia Fed, Harker, stated that the Federal Reserve does not need to further raise interest rates.
However, US Treasury Secretary Yellen pointed out that the outlook for the US economy is optimistic, but high interest rates need to be maintained for the long term. European Central Bank President Lagarde emphasized that the risk of oil price increases caused by geopolitical crises will curb the economies of Europe and the US.
According to the People's Bank of China, China's new CNY loans marked Yuan 2.31 trillion in September, with an increase of Yuan 950 billion month on month, but a decrease of Yuan 176.4 billion year on year. However, the resurgent credit market has not alleviated the sluggish situation of copper consumption.
Despite the expected demand from State Grid in the fourth quarter providing support for consumption, the plunge in new construction areas in real estate and the decline in demand from industries such as refrigeration and home appliances after the peak season are still dragging down market confidence.
China's refined copper imports continued to maintain a profit margin of around Yuan 200/tonne in October, boosting customs clearance for imported copper. However, the refined/secondary copper rod price difference has shown a significant inversion, leading to demand gathering on the refined copper side. Even so, the premium of refined copper in China still remained under pressure at almost 0, mainly due to extremely loose supply expectations in the fourth quarter.
Overall, the geopolitical crisis has intensified the risk aversion among market participants, which may lead to drastic fluctuations in copper prices. Adequate supply and sluggish demand in the fourth quarter are expected to lead to further accumulation of inventory. Therefore, copper prices lack support in the short term.
Data Source: SHFE
Data Source: SHFE
Written by Edenlis Huang, huangting@mysteel.com
Edited by Paula Xu, xuzhongping@mysteel.com