Source: Wall Street News Author: Li Dan
Analysts say that the factory has increased its purchasing efforts and replenished inventory, but there has not been a significant rebound in consumer spending by end users during the summer lull.
A key indicator of global copper demand, China's demand for copper, is reflected in the first positive turn in the Yangshan copper premium in nearly two months, illustrating increased purchasing power by users, although whether the demand is truly rebounding remains uncertain.
On April 24th this year, the Yangshan copper premium fell to zero for the first time in history, seen as a sign of weak Chinese copper import demand. Data from the Shanghai Nonferrous Metals Network shows that on Friday, July 5th, the Yangshan copper premium quote rose to $3/ton. This is the first time in nearly two months that the indicator has rebounded to a positive value.
Trading center data shows that since May, the copper price in the Shanghai Free Trade Zone has been abnormally discounted compared to London copper. In the case of weak fundamental metal demand, buyers are unwilling to buy copper at record prices. However, in recent months, as the market focus has shifted back to Chinese demand, speculative funds pouring in to drive copper prices to new highs has gradually slowed down. The positive turn in the Yangshan copper premium is another initial sign that the copper market is stabilizing in recent weeks. Earlier data showed that Chinese copper inventories fell in June following a surge in May.
However, it is still uncertain whether the reason for the increase in purchasing volume by buyers is due to delayed purchases or a real improvement in potential demand. The latest data from the Shanghai Futures Exchange shows that copper inventories have risen slightly again in the past week, which is a negative signal for the market.
The GTJA futures analyst Ji Xianfei mentioned that "factories have increased their purchasing efforts to replenish their inventory". After the copper price fell from its record high, the purchasing volume has rebounded slightly, but there has not been any significant rebound in consumer demand during the summer lull period.
This Friday, copper futures prices listed in London and New York both rose. LME copper rose 1% in intraday trading, up more than 0.6% at the close, rising for six consecutive days and closing above $9,900 for the first time in more than three weeks. NY copper rose nearly 3.7% in early European trading, approaching $4.70, hitting a new high since the end of May.
The main driver of the rise in copper prices on Friday was the weaker-than-expected non-farm payroll growth in June in the United States, which strengthened expectations of a Fed rate cut this year. In addition, some traders adopted short covering operations to reduce risk exposure, which also pushed up copper prices as expected shipments of copper to the United States did not arrive. Dan Smith, research director at Amalgamated Metal Trading, said that the inventory that should have been shipped to the United States has obviously not yet arrived.
It is still unclear what caused the delay in copper shipments. Data shows that CME copper inventories are significantly insufficient, falling by 71% since the end of March to a record low of 8,947 tons since 2008.
This commentary stated that part of the reason for the historic high copper prices in May was due to a short squeeze in the Comex exchange. After reaching a new high, the reason why copper prices continued to decline was partly due to investors expecting copper materials to arrive in the U.S. and short positions could be closed. Some traders said on Friday that some market participants could not tolerate this volatility and there would be some panic short covering to prevent previous volatility. If there are no regular participants, the volatility could be greater.
Editor/Lambor