There are uncertainties in China and the US policies, and copper prices continue to fluctuate and weaken
Recently, copper prices have shown a fluctuating and weak trend in the market outside China. In the early trading on Monday, the main 2412 contract of Shanghai copper futures fluctuated, and the decline in the market gradually narrowed, and then rebounded slightly. As of 10:15, the closing price was 73,840 yuan per ton, a small increase of 100 yuan, or 0.14%. However, the overall market activity was limited. The downstream demand entered the market, and most of them favored low-priced sources. The holders were reluctant to sell at a high price, and the buying and selling transactions were deadlocked.
The US dollar's strong presence on foreign exchange markets and its strengthening saw an alloy of marked down price pressure both on base metal commodity prices and on its spot markets. Needless to add, Powell's speech on interest rate cut expectations further stoked this fire as the better showing of US economic data tended to accelerate these notions and help thereby buoy the dollar. Higher dollar prices made non-ferrous metals, like copper, a little less appealing to investors holding other currencies.
In addition, China's policy is in a window period, and the macro environment is slightly bearish. At the same time, the market is worried that Trump's trade and tariff policies after being elected president may suppress the Chinese economy, thereby affecting metal demand. This worry has further suppressed copper prices. From the perspective of supply and demand fundamentals, the supply of copper concentrate is still tight, but the maintenance of crude copper in the fourth quarter is relatively strong, which may alleviate some supply pressure. The spot market is quiet, market transactions are limited, long-term contract negotiations are slow, port inventories continue to accumulate, and smelters have sufficient inventories. These factors have put some pressure on copper prices.
China's production of electrolytic copper was down on the month in October but up on the year. The fourth quarter would experience a recovery in farming intensity; hence, in that context, a slight average decrease of further copper output month-on-month is quite likely. On the import side, October's net import of refined copper came down on the year-on-year comparison while scrapping imports were also down month-on-month. This data reveals that there is a high uncertainty with respect to supply-side copper considerations. Nonetheless, the explicit inventories of copper globally, including LME and China's refined copper social inventories, slightly declined. This reflects some relaxation of copper inventory pressure and is providing copper price support on the upside.
There was no panic in the downstream after the rapid fall in copper prices; the downstream merely began to replenish inventories. This indicates some resilience on the part of copper demand downstream. In short, the price drop so far has been relatively limited in technical terms. Today's trading range for copper is expected to be 73,500-74,000 yuan per tonne. In the short run, copper prices are likely to find some support around these levels. But the market activity overall remains lukewarm, and it's prudent for other investors to remain cautious for a while. All in all, these are going to be a plethora of issues that will influence the copper price outlook: on the one hand, considering the macroeconomic perspective, everything would influence the price of copper; directions to be followed by the U.S. dollar, trends of fiscal policy, taxation, and tariff policies in the short to medium term; and, on the other hand, fundamentals: long-term price movement direction depend on sectors like supply and demand, inventory levels, and downstream demand.
In the near term, copper prices may stay volatile and on the decline. Yet the uncertainty on the supply side and resistance of downstream demand also provide a potential for copper price recovery. The investors are advised to keenly watch the market dynamics and policy shifts to chalk out sensible investment strategies.
