Affected by copper prices, copper wire prices continue to decline
Copper prices continued to fall in June, with London copper falling from $9437 / ton at the beginning of the month to $8122 / ton, the biggest drop of nearly 14%. Shanghai copper fell as much as 14 percent to 61,620 yuan a tonne from 71,740 yuan at the beginning of the month. Unlike the fall that began in late April, the renminbi has not depreciated significantly during this round of copper price declines, so the pace of decline is more consistent in both internal and external trading.
The current round of copper prices tumbled for the macro - sentiment dominated. On 10th of this month, THE US released the CPI data in May, which hit a new high in this year and was close to a 40-year high. The higher-than-expected inflation data led to the enhancement of the expectation of the Federal Reserve to accelerate tightening, and the decline of copper prices started. Subsequently, at the Fed meeting in mid-month, the Fed raised the interest rate to 75bp and showed a strong determination to control inflation. The market expected that the Fed would raise interest rate again by 75bp at the Meeting in July. The rapid tightening expectation led to lower inflation expectation and intensified fears of economic recession, and copper price fell rapidly.
At the macro level, the Federal Reserve will soon raise interest rates and shrink the balance sheet will still bring great pressure to the future economy and copper demand, and the general direction of copper prices is still bearish. In the short term, the Fed is likely to return to a less aggressive course of rate hikes as inflation expectations fall. The probability of a 75 basis point hike at the Fed's July meeting fell to 92.1% on June 27 from 95.7% on June 21, according to CME Fed Watch. Once the pace of policy tightening marginal slowdown, copper prices may usher in a stage of breathing.
The decrease of copper price also further affects its downstream industry chain, among which the price fluctuation of cable industry is larger. Lower raw material prices and weaker industrial supply and demand margins also contributed to the sharp fall in prices. In the short term, as inflation expectations fall, the Federal Reserve is likely to return to a less aggressive pace of interest rate hikes, coupled with the possible marginal improvement in domestic demand, low inventory support and the release of pessimism, copper prices are expected to gradually stabilize or even stage rebound. Recently there are cable procurement demand, you can take advantage of this opportunity to purchase buy, eat a wave of copper price drop dividend.
