Geopolitical Disruptions Marginally Eased, Copper Prices Fluctuated Upward at Highs [SMM Macro Weekly Review]

At the beginning of this week, the market continued to trade back and forth around the US-Iran ceasefire agreement and expectations for subsequent negotiations. The US indicated that the ceasefire agreement remained in effect and that the US and Iran were making progress on ending the war and a 30-day negotiation framework, which marginally eased market concerns over further escalation in the Middle East. Combined with a weaker US dollar, copper prices were generally supported. The strengthening of the Japanese yen and suspected renewed intervention in the foreign exchange market by Japanese authorities also intermittently weighed on the US dollar. By mid-week, although the US and Iran exchanged fire again, neither side broke the existing ceasefire framework, and the market shifted back to a wait-and-see mode, with copper prices fluctuating at highs. Overall, the macro theme this week remained the tentative stability of the US-Iran ceasefire framework and negotiation expectations supporting risk appetite. However, geopolitical tensions had not truly been cleared, and copper prices held up well.

On the fundamentals side, post-holiday supply showed a pace of tightening first, then loosening, and then marginally tightening again. At the beginning of the week, imported copper arrivals decreased and suppliers had weak willingness to sell, leading to overall tight spot circulation. Subsequently, imported and domestic sources arrived successively, marginally easing supply. However, toward the end of the week, domestic source arrivals decreased and imported sources were delayed in arriving at ports due to logistics disruptions, causing spot supply to tighten again. The demand side was generally weak. After pre-holiday stockpiling ended, downstream resumption of operations was slow, and high copper prices suppressed purchase willingness, with the market mainly focused on restocking for immediate needs.

Looking ahead to next week, the macro logic is expected to remain largely unchanged for now. If the US-Iran ceasefire framework continues to hold, a weaker US dollar is expected to provide some support for copper prices. However, given sporadic exchanges of fire and Iran's lack of a clear response to the US proposal, geopolitical uncertainty is expected to limit upside room for copper prices. On the fundamentals side, slow post-holiday demand recovery and rising inventory are expected to constrain prices on the upside, but tight spot circulation is also expected to provide support on the downside. Copper prices are expected to move sideways at highs in the short term. LME copper is expected to fluctuate between $13,300-13,800/mt, and SHFE copper between 103,000-106,500 yuan/mt. On the spot side, against the backdrop of elevated absolute prices and slow demand recovery, trading activity is expected to remain cautious. Spot prices against the SHFE copper front-month contract are expected to range from a discount of 40 yuan/mt to a premium of 150 yuan/mt.