Macro Front Sees Mixed Bullish and Bearish Sentiments, Copper Futures Fluctuate Rangebound During the Week 【SMM Weekly Macro Review】

On the macro front, the US April non-farm payrolls exceeded expectations and the unemployment rate remained stable, temporarily alleviating recession fears. However, the Q1 GDP contraction of 0.3% on an annualized basis revealed a decline in endogenous growth momentum. Coupled with potential retaliatory tariff threats, the risk of economic stagnation has risen. Although the US Fed has paused interest rate hikes three times in a row, Powell's statements have kept the door open for interest rate cuts and reiterated policy independence. While this has soothed the market, it cannot conceal the pressure of sticky inflation on real interest rates. China, on the other hand, has preemptively launched unexpected easing measures, including RRR cuts, interest rate cuts, and reductions in housing provident fund rates, completing policy hedging before the US Fed's interest rate decision. It has clearly shifted its monetary policy objectives towards "stabilizing growth + promoting price rebound", directly stimulating infrastructure/real estate chains and new energy capacity. Copper futures have been caught in a tug-of-war between bulls and bears during the week: macroeconomic recession risks are pitted against tight fundamentals. LME copper fluctuated between $9,350-9,550/mt, while the most-traded SHFE copper contract fluctuated rangebound between 77,000-78,000 yuan/mt.

On the fundamental front, copper cathode imports in April declined MoM from March, but copper concentrate imports exceeded historical highs. During the Labour Day holiday, domestic copper cathode inventories fell instead of rising. The backwardation structure of the nearby SHFE copper contract widened by more than 600 yuan/mt at the end of the week, sparking market concerns about structural risks. Spot premiums rapidly fell from 300 yuan/mt at the beginning of the week to near parity, with market trading shifting more towards deferred contracts. The sustainability of downstream enterprise consumption currently appears weak. After entering May, the operating rate has shown a downward trend. While orders on hand continue to be depleted, growth in new orders remains limited. However, the structural issue of tight raw material supply at the upstream end remains difficult to alleviate in the short term.

Looking ahead to next week, the US and the UK have initially reached a consensus on tariff issues. It is necessary to monitor new developments in tariff and trade issues between China and the US after their talks in Europe. Whether macroeconomic tensions ease will bring significant uncertainty to subsequent copper price fluctuations. It is expected that LME copper will fluctuate between $9,350-9,600/mt next week, while SHFE copper will fluctuate between 77,000-78,500 yuan/mt. On the spot front, under a high backwardation structure, spot prices against the SHFE copper 2505 contract have fallen to near parity. It is expected that the backwardation structure will still widen on the last trading day of the 2505 contract. Spot prices against the SHFE copper 2505 contract are expected to range from a discount of 200 yuan/mt to parity. After the contract rollover, it is expected to range from a premium of 300-500 yuan/mt against the SHFE copper 2506 contract.