Summary The surge in U.S. copper prices in May led to a stronger-than-expected increase in non-agricultural employment, which sparked market concerns about the Federal Reserve's potential slowdown in its quantitative easing program. As the outlook for stimulus policies remained uncertain, this caused a temporary pullback in the upward momentum of copper prices. Subsequent weak Chinese data failed to provide any relief to the copper market, with both CPI and PPI figures declining, and trade growth dropping sharply, highlighting concerns over domestic economic performance.
Market Sentiment and Negative News Fuel Price DeclinesIn May, the U.S. non-agricultural employment numbers exceeded expectations, raising fears that the Fed might slow down its bond-buying program. This uncertainty quickly dampened the bullish momentum in copper prices. Meanwhile, China’s weak economic indicators—such as falling CPI and PPI, along with a sharp drop in trade growth—added to the pressure on the market. The Bank of Japan surprised investors by maintaining its current monetary policy and rejecting expectations of an extension to fixed-rate loan terms. This decision further pressured copper prices, reflecting growing doubts about Japan’s economic recovery prospects. Within just a few days, a series of negative developments from both domestic and international markets emerged, acting as the main driver behind the downward trend in copper prices. With demand growth slowing, the support for the copper market remains weak, making it more vulnerable to macroeconomic shifts. Supply Concerns Are Easing
India’s largest copper smelter, Birla, was forced to halt operations earlier this year due to environmental issues. However, recent updates indicate that the facility is expected to resume production on schedule, which should help alleviate global supply shortages. Meanwhile, Indonesia’s Freeport Grasberg mine remains suspended due to force majeure, creating short-term supply constraints. However, without a strong rebound in Chinese demand, and with smelting capacity gradually recovering, the gap between supply and demand is likely to widen, putting continued pressure on copper prices in the coming months. Market Outlook
Overall, copper prices have returned to the range of the moving average, but the rebound has been weak, driven largely by worries about macroeconomic growth. With the Dragon Boat Festival recently concluded, the market has started to absorb some of the negative economic news. While the suspension of major copper mines still offers limited support, the overall trend remains bearish. In the short term, the decline in copper prices is expected to be limited, with the market likely to remain in a weak consolidation phase. However, as fundamental factors gradually fade, concerns over demand will become more pronounced, leaving the copper market exposed to further downside risks.
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