The Shanghai Futures Exchange's (SHFE) warehouse warrants for copper futures fell 4,025 tonnes day on day to 37,855 tonnes on October 26, leading to a week-on-week plunge of 32,692 tonnes or 46.34%, and a surge of 33,051 tonnes or 687.99% month on month.
Speaking at the Financial Times mining summit, Kostas Bintas, co-head of metals and minerals trading at Trafigura said that the current copper market only maintained inventories for 4.9 days of global consumption. At the same time, he expected it to fall to 2.7 days this year and global copper inventories have fallen to dangerously low levels. In the past, copper inventories were typically measured in weeks. Limited inventory increases the risk of a sudden spike in prices. While a strong US dollar and fears of a global recession have weighed on copper prices in recent months, global metals executives said that limited supply has continued to support copper prices.
SHFE copper prices remained high, while the continued decline in spot premium reflected the shifting relationship between supply and demand. The US dollar index was steady at around 112. China's GDP grew 3.9% year on year in the third quarter, which data increased by 3.5 percentage points from the second quarter. Maximo Pacheco, Chairman of Codelco, Chile's largest copper mining company, said that despite the slowdown in China's economic growth, the company expected the copper demand of China as its main consumer will remain flexible. China has purchased about half of Codelco's copper production. China also accounts for about half of the world's copper consumption. Analysts estimate that the global copper consumption this year will be about 25 million tonnes.
The current macro recession trading logic has not faded, as the Fed rate hike path is still hawkish. Therefore, copper prices are expected to be bearish in the fourth quarter amid rising global stagflation concerns and monetary tightening. The pressure level in SHFE copper is Yuan 65,000-66,000/tonne, and the bottom level is Yuan 56,000-58,000/tonne. There is strong support around the 90-percentile copper cost in the extreme case, which is Yuan 53,000/tonne. It is still recommended to mainly short at a high price.
Data Source: Mysteel
Data Source: Mysteel
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