On the macro front, last Wednesday, the US Fed decided to raise the interest rates by 75 basis points for the fourth time in a row at the November meeting and suggested that the pace of rate hikes may be slower in December 2022. Besides, the US ADP employment released on the same day performed better than expected. The market had various expectations for the Fed’s rate hikes in December and kept close attention to the nonfarm payrolls due last Friday, waiting for further guidance. In China, on November 2, the National Health and Medical Commission made it clear that China will adhere firmly to the zero-COVID strategy. And efforts must be made to control the sudden pandemic outbreak to the smallest scope in the shortest time with the lowest cost. Many local governments in China have notified that regular pandemic prevention and control will be implemented and no nucleic acid test is needed for taking trains or planes. On November 4, the German Chancellor Scholz visited China, which may tune down the previous voice made by some officials of the German government of decoupling from China and reducing Sino-German economic and trade cooperation. China-Germany relations have certain resilience. Boosted by the macro factors, the foreign exchange, stock market, and commodity prices all closed with gains last Friday. Under the expectation that the market transactions will be liberalised, prices of the most traded SHFE copper reached more than 64,000 yuan/mt.
On the fundamentals, inventories of LME and SHFE copper warrants declined successively. LME copper inventory dropped to around 94,000 mt in the week, mainly driven by the destocking in the Asian warehouses. The domestic and overseas visible inventories remained low. In terms of consumption, some wire and cable factories in Guangdong, Hebei and other regions got high in-plant inventories of finished products as their shipments were hindered by COVID-19, and they had to cut their output amid the financial pressure. In addition, as of last Friday, the discount of secondary copper rods in Jiangxi stood at 950 yuan/mt against SHFE copper, expanding the spread between the copper cathode rod and the secondary copper rod to 1,615 yuan/mt, which had an impact on copper cathode rod enterprises. SMM copper inventory across major Chinese markets added 4,300 mt from last Monday to 96,200 mt. In general, the macro sentiment tended to ease. The fundamentals showed signs of weakening, but the spread between the SHFE 2211 and 2212 copper remained high. The short squeeze will prop up the copper prices before the delivery of SHFE 2211 copper.
The most traded SHFE copper will fluctuate with some upward potential. SHFE 2212 copper is expected to move between 64,500-67,500 yuan/mt, and LME copper will trade between $7,700-8,000/mt. In the spot market, the continuous inflow of Russia copper will cast a certain impact on spot premiums. Cargo holders, who get long-term orders in their hands, and the smelters may together make a great effort to keep the prices up. Some goods would be converted into warrants for delivery if the discounts expanded. Spot discounts are expected to move between 200-100 yuan/mt over the SHFE 2211 copper.
Source: SMM News
