I. Trend analysis
Last week, copper prices rose first and then fell. As of the end of this week, the spot copper price was 78,410 RMB/ton, up 0.04% from 78,286.67 RMB/ton at the beginning of last week, up 0.16% from the beginning of the year, and down 2.93% year-on-year.
According to the weekly rise and fall chart of SunSirs, in the past three months, copper prices rose slightly last week after falling for 4 weeks and rising for 7 weeks.
LME copper inventory
According to data released by the London Metal Exchange (LME). LME copper inventory fell slightly. As of last weekend, LME copper inventory was 13,800 tons, down 7.92% from the beginning of the month.
Macro aspect: The Trump administration officially signed an executive order to double the tariffs on imported steel and aluminum products to 50%, exacerbating market concerns about the spread of the trade war. Combined with the signal that the US-Iran nuclear agreement negotiations temporarily allowed Iran's uranium enrichment activities, international crude oil prices rose and then fell, and the fluctuation of inflation expectations affected the nerves of the metal market. The central bank continued its loose monetary operation, and the DR007 interest rate fell sharply by 11.49 basis points to 1.5496%. Ample liquidity provided mild support for the metal market.
Supply side: The short suspension of production at the Kakula copper mine in the Democratic Republic of the Congo was exaggerated by bulls as an example of a supply crisis. However, it should be noted that the mine's output in 2023 will only account for 0.6% of the world's total, and Ivanhoe Mines has announced that it will resume production this month. The global copper mine grade continues to decline, and the development cycle of new projects is as long as 7-10 years. This is the medium- and long-term logic supporting copper prices. At present, the domestic spot processing fee for copper concentrate has fallen to the limit of the smelter's tolerance, and the mid-year long-term negotiation quotation of TC-15 US dollars/ton highlights the strong position of mining companies.
Demand side: After the May Day holiday, downstream inventory replenishment led to an improvement in spot transactions, and the domestic trade copper premium expanded to 230 RMB/ton, but the weak growth of new orders showed that the terminal consumption momentum was insufficient. There are rumors in the market that the leaders of China and the United States may have a phone call in the near future. If trade relations ease, the uncertainty of the US copper tariff premium may be partially eliminated, but the shrinking trend of the global manufacturing PMI (the data of China and the United States in May were both below the boom-bust line) still constrains demand expectations.
In summary: mine accidents and low inventory may push prices to continue to fluctuate strongly at high levels, but the downward pressure brought by escalating trade frictions, weak demand and the Fed's policy shift.
It is necessary to pay close attention to the Fed's June interest rate meeting and China's refined copper export policy trends. It is expected that copper prices will continue to fluctuate widely in the short term.
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