Trade Optimism Emerges & US Dollar Index Pulls Back, Copper Prices Fluctuate Upward [SMM Copper Morning Comment]

SMM, February 21: Overnight, LME copper opened at $9,539/mt, fluctuated upward throughout the session, hitting a low of $9,510.5/mt during the fluctuations and a high of $9,575/mt near the close, finally settling at $9,558/mt, up 1.23%. Trading volume reached 18,000 lots, and open interest stood at 287,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened higher at 77,940 yuan/mt, then shifted lower to a low of 77,560 yuan/mt, before fluctuating upward and closing at 77,670 yuan/mt, up 0.13%. Trading volume reached 20,000 lots, and open interest stood at 169,000 lots. Macro side, US initial jobless claims for the week ending February 15 slightly exceeded expectations, recording 219,000, higher than the expected 215,000. US Fed's Bostic stated that two interest rate cuts are still expected this year, but significant uncertainties remain. The US dollar index weakened noticeably. Meanwhile, the US announced on Wednesday that new tariffs would be introduced within the next month or sooner. Trump announced that lumber tariffs might be revealed on April 2. However, the US is currently negotiating a peace agreement with Russia, and the US has hinted that lifting sanctions could be part of the deal. Additionally, Trump stated that the likelihood of reaching a trade agreement with China is high, potentially easing trade dispute concerns in the short term. With the US dollar index weakening significantly, copper prices remained at relatively strong levels. Fundamentally, the contango structure widened, reducing suppliers' willingness to sell spot cargo. Meanwhile, as the export window opened, smelters began planning for exports, which is expected to support premiums in the future. As of Thursday, February 20, SMM data showed that copper inventories in major regions across China increased by 7,300 mt from Monday to 357,600 mt, up by 31,400 mt from last Thursday, and up by 191,800 mt compared to pre-Chinese New Year levels. The inventory buildup in the first two weeks after the holiday exceeded last year's levels by 54,400 mt, marking the highest inventory buildup in the past seven years. In summary, with the US dollar index weakening significantly, copper prices are expected to remain supported.