Copper opened at a low of 70,630 yuan/ton overnight and fell by 3.33% during the trading day. At the close, the block orders of copper in Shanghai fell by 2.41% to 71,300 yuan/ton, while the copper contract in London fell by 2.18% to $8,858/ton overnight. Today, the block orders of copper in Shanghai rebounded and opened at 72,240 yuan/ton before shaking and falling back.
Macroeconomically, the US non-farm payroll data triggered the “Sam rule,” coupled with the yen interest rate hike and the surge of geopolitical risks in the Middle East and Russia and Ukraine. The market panic index soared, and risk assets plummeted, with multiple stock market crashes yesterday. Gold, crude oil, and copper all plummeted, triggering concerns about a financial crisis. Today, the Japanese stock market opened sharply higher, with the Nikkei 225 index rising more than 10% and recovering more than half of yesterday’s decline. Fedwatch from the Chicago Mercantile Exchange (CME) showed that the market expects the probability of the Federal Reserve cutting interest rates by 50 basis points in September to exceed 90%. The market began to price in an unexpected rate cut by the Federal Reserve, but the Federal Reserve said it would not overreact to weak employment data for a single month. The US non-manufacturing index (ISM) for July was 51.4, better than the expected 51, breaking free from the worst shrinkage in four years in June, and the market sentiment slightly eased, paying attention to the follow-up macro-credit and import and export data for July.
Fundamentally, the imported copper concentrate index continues to climb to USD 7.8/tonne, and overseas copper concentrate supply is marginally relieved. The latest copper concentrate spot smelting loss is RMB 1,981/tonne, and the long-single copper concentrate smelting profit is RMB 1,651/tonne. It is expected that the domestic electrolytic copper output in July will be 1.0166 million tonnes, still at a high level. In terms of demand, real estate and automobiles are weak, appliances and electrical power maintain toughness, traditional consumption off-season, coupled with last week's copper price rebound to the high, downstream copper processing enterprises start to fall back, SMM electrolytic copper bar weekly start-up rate 77.97%, a decrease of 0.25% MoM, recycled copper bar weekly start-up rate 18.44%, a decrease of 5.4%. As of August 6th, copper stocks in mainstream regions of China increased by 0.0001 million tonnes to 0.3485 million tonnes MoM, and total inventory was 0.2552 million tonnes higher than the same period last year. LME copper inventories rose to 0.2514 million tonnes, and COMEX copper inventories rose to 16,200 tonnes. Overseas copper inventories are still accumulating, indicating insufficient demand.
According to Xiao Yanli, an analyst at Zhonghui Futures, overall, the joint impact of economic recession and financial crisis concerns, coupled with the fact that overseas LME copper inventories are still accumulating, domestic copper concentrate processing fees continue to rise, supply concerns are alleviated, downstream start-ups are weak during the off-season, and short-term copper breaks down. It is recommended to continue to hold short positions in the early days, partially take profits on dips, appropriately reduce speculative positions, control risks, and not frequently enter and exit the market to avoid chasing after rises and falls. Industry hedging actively lays out opportunities to sell hedging arrangements for enterprises at every rebound before economic demand improves. In the medium and long term, the tension of copper concentrate and the demand for green copper still exist. We are waiting for the accumulation of copper overseas stocks to end while preparing for the peak season in September and October in China. Focus on the range of RMB 70,000-74,000/tonne for copper in Shanghai and the range of USD 8,700-9,200/tonne for copper in London.
Risk warnings: Insufficient demand, Fed interest rate cuts, geopolitical risks.