Trump's Policy Swings Lead to a Sharp Decline in the US Dollar Index, Macro Fundamentals Jointly Guide Copper Prices Upward [SMM Macro Weekly Review]

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         On the macro side, this week saw renewed US-China trade tensions, with market panic intensifying ahead of US tariff implementation. The US dollar index plunged from around 107 points to below the critical 104-point mark during the week, while persistently weak employment and economic indicators heightened concerns over cooling US consumption. US Treasury sell-offs pushed the 10-year Treasury yield upward. In China, the "Two Sessions" held this week set the tone for 2025 economic policies, maintaining the annual GDP growth target at 5% and raising the fiscal deficit ratio to support economic growth. Overall, consumption resilience remained robust under policy support. Affected by the sharp drop in the US dollar index and the impact of US tariffs, the COMEX most-traded contract surged over 5% during the week, with the price spread between LME and COMEX exceeding $1,000/mt again. LME copper was forced to rise, climbing from $9,350/mt to around $9,660/mt by the week's end, while the most-traded SHFE copper contract jumped to just below 79,000 yuan/mt.

         On the fundamentals side, the copper concentrate market continued to deteriorate, with the SMM Imported Copper Concentrate Index (weekly) falling to -$15/mt. Due to the narrowing LME structure, the spot QP shifted forward from M+5 and M+6. Domestic copper concentrate port inventory continued to decline as some smelters conducted maintenance in March, highlighting tightness in the cold material market both domestically and abroad. For copper cathode, the North American siphoning effect continued to absorb shipments from South America and Africa, while transshipment of South American B/Ls also emerged in the Asian offshore market. The price spread between domestic sources and CME-registered B/Ls widened further, breaking $50/mt during the week to reach a historical high, with significant market divergence. Domestically, social inventory began destocking this week, spot premiums continued to rise, and suppliers showed a strong sentiment to stand firm on quotes. The SHFE copper 2505 to 2507 contract structure expanded to around a BACK of 250 yuan/mt, with import tightness expectations transmitting to the domestic market.

         Looking ahead to next week, US CPI data and tariff changes are expected to provide more guidance for the US dollar. If CPI data continues to decline, the US dollar may face more resistance, offering stronger support for copper prices at the bottom. If this resonates with upstream tightness, copper prices may still have upside room. LME copper is expected to fluctuate between $9,600-9,850/mt, while SHFE copper is expected to range from 78,000-79,500 yuan/mt. On the spot side, although domestic smelters show no signs of production cuts, inventory destocking has boosted market confidence in standing firm on quotes. Spot prices against the SHFE copper 2504 contract are expected to range from a discount of 50 yuan/mt to a premium of 30 yuan/mt.

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