China-U.S. Talks Send Signals of Easing, LME Copper Jumps Initially and Then Pulls Back Within the Week [SMM Macro Weekly Review]

Macro side, US employment growth in May slightly exceeded expectations, but the pace of growth slowed down. Coupled with core CPI and PPI data both falling short of expectations, this strengthened market expectations for a US Fed interest rate cut within the year. The US dollar index continued to weaken, providing support for copper prices. However, the Trump administration's escalation of tariffs on imported steel and aluminum, as well as potential policy risks related to additional tariffs on copper, still weighed on market risk appetite, limiting the upside room for copper prices. Meanwhile, the economic and trade consultations between China and the US held in London sent signals of easing trade relations, and the US was reportedly considering lifting some restrictions on technology and energy exports in exchange for policy adjustments by China on rare earth exports, which boosted market confidence to some extent. The China-US talks are still ongoing, and no official announcement has been made yet, keeping the market in a cautious wait-and-see mood. This week, copper prices jumped initially and then pulled back, with LME copper trading around $9,650-9,750/mt and SHFE copper trading around 78,000-79,000 yuan/mt.

On the fundamental side, the copper concentrates index continued to decline this week, with initial counteroffers from Chinese smelters in the mid-year negotiations remaining at a high single-digit level. Production cuts and shutdowns at overseas smelters persisted. For copper cathode, spot premiums both domestically and internationally fell sharply this week, with weak spot transactions. The backwardation structure of SHFE copper widened again, and downstream consumption sentiment was poor. Overall, as consumption entered the off-season, spot premiums in the copper cathode market came under pressure.

Looking ahead to next week, with the US Fed's interest rate-setting meeting approaching, it is expected that the benchmark interest rate will remain unchanged in June. However, due to the impending maturity of US Treasuries and the recent poor performance of the Treasury auction market, which has led to significant volatility in US Treasuries, the US dollar is expected to remain at a low level. As the situation between China and the US gradually eases, market risk aversion has declined somewhat, which is expected to provide support for copper prices. It is expected that next week, LME copper will fluctuate rangebound within $9,600-9,800/mt, and SHFE copper will fluctuate within 77,500-79,500 yuan/mt. On the spot front, next week is the last trading day for the SHFE copper 2506 contract. After the backwardation structure of SHFE copper widened before delivery, the premium against the SHFE copper 2507 contract has surged. Spot prices against the SHFE copper 2507 contract are expected to range from a premium of 70-250 yuan/mt.