Improved Sentiment Drives Increase in Copper Prices
Copper prices experienced a upswing, open at 729.80, propelled by a boost in sentiment due to China’s central bank’s commitment to addressing local government debt risks.
This positive momentum was further bolstered by the presence of low stocks, contributing to the overall upward trajectory in the market.
China’s Central Bank Takes Steps to Tackle Local Debt Risks
China’s central bank issued a statement urging collaboration among financial departments to effectively tackle local debt risks. Emphasizing the enhancement of risk prevention and management tools.
The central bank aims to address these challenges while keeping a watchful eye on avoiding potential systemic risks.
Market Surprised by Unchanged Five-Year Rate
Contrary to expectations of a potential reduction in the one-year benchmark lending rate to stimulate credit demand. China’s decision to keep the five-year rate unchanged took markets by surprise.
This unexpected move added an element of unpredictability to the financial landscape.
Inventory Levels and Implications
Last Friday, copper stocks on the Shanghai Futures Exchange (SHFE) experienced a notable decline of 25.9%, reaching 39,228 tons—the lowest recorded since September 2022.
On the London Metals Exchange (LME), net long positions of copper have surged to a six-month high. Partially influenced by the revelation of low Chinese copper inventories data.
Supply-Demand Dynamics
The combined inventory of the Shanghai Futures Exchange and Chinese bonded warehouses stood at 110,314 metric tonnes on August 11, reflecting a year-on-year decrease of 53%. This equates to a supply sufficient for slightly less than three days of consumption.
Meanwhile, Chinese copper stocks available in the spot market, housed within the Shanghai Futures Exchange’s warehouses, saw a year-on-year increase of 17.5%, totaling 82,600 tonnes on August 14.
Conclusion
Copper’s recent price movement, driven by China’s central bank initiatives and inventory dynamics. Highlights the intricate interplay of factors shaping the market.
As these dynamics continue to evolve, market participants remain attentive to shifts that could impact copper prices and the broader economic landscape.