U.S. inflation data cooled, geopolitical tensions escalated, and copper futures pulled back under pressure [SMM Copper Morning Comment]

SMM, July 16: Overnight, LME copper opened at $13,602/mt, rose to a high of $13,644/mt early in the session, then drifted lower to $13,532/mt, and finally closed at $13,581/mt, down 0.14%. Trading volume reached 15,000 lots, and open interest stood at 241,000 lots, down 1,977 lots from the previous trading day, indicating long position reduction. Overnight, the most-traded SHFE copper 2608 contract opened at 104,520 yuan/mt, edged up to 104,680 yuan/mt early, then drifted lower to a low of 103,940 yuan/mt, and finally closed at 104,040 yuan/mt, down 0.17%. Trading volume reached 17,000 lots, and open interest stood at 138,000 lots, down 2,001 lots from the previous trading day, also indicating long position reduction. On the macro front, the US June CPI and PPI both came in below expectations—PPI fell 0.3% MoM (vs. expected flat), and the YoY growth rate narrowed significantly from 5.5%. Core PPI YoY slowed to 4.7%, with a mere 0.2% MoM increase, all below market expectations, further weakening market expectations for Fed rate hikes this year. However, Fed Chairman Warsh said he was not satisfied with any inflation indicators, striking a hawkish tone. Geopolitically, Trump said Iran wanted to meet, but Trump’s side prefers to expand military operations, with options including seizing Kharg Island. Iran said it will not proactively seek negotiations, has no negotiation plans at present, and is focused on defense. Additionally, Vance accused some within Israel of manipulating US public opinion to prolong military operations. Overall, while inflation data eased rate hike expectations, escalating geopolitical conflicts weighed on copper prices. Fundamentals side, supply-side tightness persisted, with both import and domestic arrivals remaining low. Demand side, the market remained in the traditional off-season, with downstream users only restocking as needed. Overall, copper prices are expected to drift lower today.