On the macro front, copper prices retreated after a rapid rise this week before rebounding again. Early in the week, the market digested hawkish remarks from Warsh at the Jackson Hole symposium, where he stressed that inflation remained clearly above target, reinforcing expectations for the US Fed to maintain a tight policy stance. A stronger US dollar dragged copper prices lower. Meanwhile, escalating US-Iran tensions and rising security risks in the Strait of Hormuz added to market uncertainty, while rising rate hike expectations pushed the US dollar higher, sending LME copper retreating after an initial surge. During the week, LME copper fell to a low of $14,102/mt, while the most-traded SHFE copper contract dipped to a low of 108,150 yuan/mt. Late in the week, US August ADP employment rose by only 38,000, missing market expectations, and the pullback in the US dollar drove copper prices to rebound. The Beige Book showed US economic activity remained resilient, though uncertainty had increased somewhat, and the market had not yet shifted to recession trading. As of 10:00 am Beijing time on September 4, LME copper settled at $14,356/mt, and the most-traded SHFE copper contract settled at 109,260 yuan/mt.
On the fundamentals side, earlier US tariff expectations drove copper flows toward COMEX, creating a regional mismatch characterized by COMEX inventory accumulation and relatively tight LME resources. With the COMEX-LME price spread narrowing sharply, the incentive for cross-market arbitrage to keep attracting copper to the US has weakened, but COMEX inventories have yet to flow back to LME, meaning the regional mismatch has not disappeared, and tight LME nearby resources continue to support LME copper. In China, as of Thursday, September 3, SMM data showed copper inventories in mainstream regions nationwide fell by 20,600 mt WoW to 88,900 mt, with total inventories down 51,700 mt from 140,600 mt in the same period last year. In addition, the recovery in the SHFE/LME price ratio drove a notable narrowing of import losses, with spot import losses for copper cathode narrowing to 53.51 yuan/mt, already close to break-even. Import conditions have improved markedly, but current arrivals are mainly previously ordered cargoes rather than a new round of import growth. Previously delayed cargoes have been arriving at ports one after another, marginally increasing domestic supply. On the demand side, copper prices remain at high levels, and early-month restocking along with traditional peak-season expectations have yet to translate into sustained orders, with downstream procurement concentrated on low-priced cargoes. This week, low domestic inventories persisted, mainly due to insufficient supply replenishment, while their role in supporting copper prices is shifting from driving gains to limiting declines.
Looking ahead to next week, the key focus will be the US August nonfarm payrolls report due this Friday, which will set the direction for next week's opening. Nonfarm payrolls are expected to return to positive growth, though the increase will remain at low levels. Slowing employment will cap expectations for US Fed rate hikes, weakening the US dollar's upward momentum and providing some support for copper prices. If nonfarm payrolls come in significantly stronger than expected, the market will raise rate hike bets again, and a stronger US dollar will push copper prices further down. If employment data deteriorate sharply, the market will shift to trading a US economic recession, and copper demand expectations will likewise come under pressure. Next week's US August CPI will further test inflation pressures. With PCE already at 3.7% and Warsh clearly maintaining a hawkish stance, as long as the CPI decline is limited, the Fed's hawkish position is unlikely to cool significantly. On the fundamentals side, previously delayed import cargoes will continue to supplement the Chinese market, and suppliers' need to shift positions and convert to cash will continue to weigh on spot premiums. However, with the import window remaining closed, domestic inventories at low levels, and blizzards in Chile plus mine maintenance affecting production, downside room for both SHFE and LME is limited. Overall, macro pressures will dominate the direction of copper prices, while low inventories mainly provide bottom support. LME copper is expected to see its center shift slightly higher next week, with an expected trading range of $14,150-14,500/mt. The most-traded SHFE copper contract will follow the gains, trading in a range of 108,000-109,900 yuan/mt.
![Improved Trading on Peak Season Expectations, Low Inventory Keeps Copper Scrap Coefficients High [SMM Weekly Review of Copper Scrap Outside China]](https://imgqn.smm.cn/usercenter/TlzAr20251217171709.jpg)
![Sellers' willingness to sell rises alongside shipments; spot premiums in North China continue to pull back [SMM North China spot copper]](https://imgqn.smm.cn/usercenter/xKfXl20251217171711.jpg)
