The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell by 5,232 tonnes day on day to 92,184 tonnes on March 21, leading to a week-on-week decrease of 22,806 tonnes or 19.83%, and a decrease of 39,102 tonnes or 29.78% month on month.
SHFE copper price rose back to about Yuan 67,600/tonne today, while premiums of refined copper in China's main markets fell by Yuan 40-60/tonne from yesterday. The increase in overseas macroeconomic risks has led to a decline in the risk appetite of market participants, suppressing copper prices. However, the Federal Reserve's rapid expansion table to alleviate the banking crisis is understood by the market as the beginning of monetary easing. The Fed will announce the results of its interest rate hike in March this Thursday. According to the latest forecast of CME FedWatch, the probability of a 25 basis-point interest rate hike is 76.8%, leading market participants to expect slowing interest rate hikes.
In terms of fundamentals, the recovery of copper consumption in China is evident, reflected in the significant decline of copper social inventory. According to Mysteel's survey, China's refined copper social inventory decreased by 40,000 tonnes week on week to 221,900 tonnes this Monday, a decline far exceeding previous years. As recent import loss has been significantly narrowed, which boosted the clearance of imported copper, traders lowered spot premiums rapidly. The arrival of the peak season from March to April will provide strong support for copper prices in China.
In summary, copper prices are expected to rebound as market participants gradually shift their focus from the banking crisis to easing expectations of the Fed and the improvement in Chinese demand.
Data Source: SHFE
Data Source: SHFE
Written by Edenlis Huang, huangting@mysteel.com
Edited by Ting Ao, aoting@mysteel.com