US Dollar Index Hits Two-Year High, Exerting Resistance on Copper Prices [SMM Copper Morning Meeting Notes]

Futures Market: Overnight, LME copper opened at $8,961.5/mt, initially hitting a high of $8,966/mt before fluctuating downward, reaching a low of $8,905.5/mt during the session. It slightly rebounded by the close, settling at $8,933.5/mt, with open interest at 262,000 lots. The most-traded SHFE copper 2502 contract opened at 73,960 yuan/mt, initially hitting a high of 74,010 yuan/mt before fluctuating downward, reaching a low of 73,740 yuan/mt by the close and settling at 73,770 yuan/mt, down 0.54%. Trading volume reached 24,000 lots, and open interest stood at 150,000 lots.

Futures Market: Overnight, LME copper opened at $8,855/mt, initially hitting a high of $8,883/mt before trending downward, reaching a low of $8,757/mt during the session. It slightly fluctuated by the close, settling at $8,781.5/mt, with open interest at 263,000 lots. SHFE copper was closed.

[SMM Copper Morning Brief] News: (1) According to CME "FedWatch," the probability of the US Fed keeping rates unchanged in January is 88.8%, while the probability of a 25-basis-point rate cut is 11.2%. By March, the probability of maintaining the current rate is 49.7%, with cumulative probabilities of a 25-basis-point rate cut at 45.3% and a 50-basis-point rate cut at 4.9%.

(2) In December, the manufacturing PMI was 50.1%, down 0.2 percentage points MoM. The non-manufacturing business activity index and composite PMI output index were both at 52.2%, up 2.2 and 1.4 percentage points MoM, respectively. All three indices remained in expansion territory, indicating accelerated production and business activities, with China's economic sentiment continuing to rebound positively.

Spot Market: (1) Shanghai: On December 31, #1 copper cathode spot prices against the front-month 2501 contract were quoted at a discount of 40 yuan/mt to parity, with an average price at a discount of 20 yuan/mt, up 20 yuan/mt WoW. Pre-holiday market quotations and inquiries were inactive, but suppliers slightly raised offers due to falling copper prices. Transactions continued to cool compared to last week. After the holiday, as traders restock, spot premiums are expected to rise further.

(2) Guangdong: On December 31, Guangdong #1 copper cathode spot prices against the front-month contract were quoted at premiums of 80-130 yuan/mt, with an average premium of 105 yuan/mt, down 70 yuan/mt WoW. Overall, year-end effects led to muted spot trades, with attention on post-holiday arrivals.

(3) Imported Copper: On December 31, warehouse warrant prices ranged from $62 to $76/mt, QP January, with the average price down $1/mt from the previous trading day. B/L prices ranged from $59 to $73/mt, QP January, with the average price also down $1/mt. EQ copper (CIF B/L) was quoted at $13-27/mt, QP January, with the average price unchanged from the previous trading day. Quotes referenced cargoes arriving in early to mid-January. On December 31, the SHFE/LME price ratio against the SHFE copper 2501 contract was around +82.35 yuan/mt. LME copper 3M-Jan was at C$92.04/mt, while the 2501-2502 spread was around C$46/mt. On the last trading day of 2024, most companies were busy with settlements. Due to weak import profit margins, market quotations and inquiries were subdued, with limited transactions observed in the morning.

(4) Inventory: On December 31, LME copper cathode inventory remained unchanged at 271,400 mt. SHFE warehouse warrant inventory increased by 752 mt to 17,936 mt.

Prices: Macro-wise, the US Fed maintained high interest rates, and the US dollar index hit a two-year high, weighing on copper prices. Domestically, starting January 1, personal housing provident fund loan rates were lowered. Fundamentally, pre-holiday market activity was notably muted, with inactive quotations and inquiries. Post-holiday, some recovery is expected. Overall, consumption is anticipated to improve after the holiday, but with the US dollar at a two-year high, copper prices are expected to face limited upward space today.

Click to View the SMM Metal Database

[The above information is based on market data and comprehensive assessments by the SMM research team. The information provided is for reference only and does not constitute direct investment advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]