On the macro front, copper prices fell first and then rebounded this week. At the start of the week, the market extended last week's decline. Combined with the Middle East conflict pushing up oil prices and inflation concerns, market expectations for US Fed rate hikes continued to heat up, and a stronger US dollar drove copper prices lower. LME copper hit a low of $13,926/mt, and the most-traded SHFE copper contract fell to a low of 106,650 yuan/mt. As the rate decision approached, a 25 bp hike had been fully priced in by the market. Early Thursday morning, the US Fed raised the target range for the federal funds rate to 3.75%-4%. The dot plot showed there was still room for one more hike within the year, but the decision did not send a stronger hawkish signal. After the earlier negatives were realized, bears cut positions in a concentrated manner. Meanwhile, Chinese and US trade teams have been maintaining close communication on issues such as tariff reductions, and risk appetite recovered, pushing copper prices higher. As of 11:00 am on September 18, LME copper closed at $14,478/mt, and the most-traded SHFE copper contract closed at 109,440 yuan/mt. The Middle East situation is still adding to inflation risks, and attention should be paid to the future direction of monetary policy.
On the fundamentals side, COMEX, LME, and China inventories all edged up this week. China's inventory increased by 1,600 mt from last Thursday to 89,100 mt, still at a low level. Meanwhile, the SHFE copper 2609 contract underwent delivery and contract rollover this week. Affected by the wide backwardation, low inventory, tight mainstream supply, and the start of pre-holiday stockpiling by some downstream buyers, spot premiums quickly shifted from slight parity at the start of the week to a relatively high level, hitting a new high for the year. On the supply side, domestic copper and imported cargoes arrived at ports in small volumes, and there are still expectations for concentrated arrivals of imported copper. However, it takes time from shipping schedules and customs clearance to warehousing, so short-term supply growth is limited. On the demand side, after copper prices pulled back, downstream dip-buying and restocking demand was released, and spot transactions improved compared with the period of high prices, but end-users have not yet fully entered peak-season purchasing. Low inventory combined with marginal demand recovery has shifted copper's role from merely limiting declines to supporting a price rebound, but the increase in future arrivals will cap the upside.
Looking ahead to next week, the US Fed rate hike has landed, and market attention will turn to statements from Warsh and other Fed officials on the future rate path. The dot plot still leaves the possibility of another hike within the year. If officials continue to emphasize inflation risks and the need for further tightening, the US dollar will be supported, and upside for LME copper will remain capped. In addition, attention should still be paid to the outcome of China-US trade discussions on tariffs and other issues. On the fundamentals side, focus on pre-National Day holiday stockpiling and peak-season demand. Based on historical China inventory records, China's inventory is expected to fall steadily. Overall, copper prices are expected to remain stable next week, with LME copper expected to trade at $14,300-14,800/mt and SHFE copper at 109,000-110,000 yuan/mt.
![Inventory continues to decline, suppliers actively hold prices firm, driving premiums sharply higher [SMM South China spot copper]](https://imgqn.smm.cn/usercenter/vdbfy20251217171709.jpg)
