Last week in macroeconomics, the ADP employment data in the US hit a three-year low. US Treasury yields continued to decrease, nearing the 3.70% threshold, with the inversion deepening. The probability of the first 50BP rate cut in September briefly surged to 45% mid-week. Although PMI data recovery slightly alleviated concerns about a hard economic landing, underlying recession risks still led the capital markets to reassess asset valuations. Goldman Sachs reversed its previous bullish stance mid-week, lowering the 2025 average copper price forecast by nearly $5,000/mt. In China, the Caixin Manufacturing PMI for August rose above the 50 mark, accompanied by the continuous appreciation of the yuan, showing an upward trend in domestic consumption. Copper prices initially fell and then rose last week, with LME copper dropping from $9,250/mt to $8,890/mt at the start of the week, and recovering to $9,100/mt by the week's end. SHFE copper fell from 74,000 yuan/mt to around 71,500 yuan/mt at the beginning of the week, and, driven by the overseas market, rebounded above 72,500 yuan/mt on Friday.
In foreign trade, spot transactions showed an upward trend at the beginning of the week. After copper prices plummeted mid-week, holders actively inquired about late-month supplies, pushing up warehouse warrant prices. Mainstream pyro copper for early September delivery was quoted at premiums of around $70-78/mt, with actual transactions at premiums of $65-70/mt. EQ copper quotes saw an increase compared to previous ones, with actual transactions at premiums of $35-40/mt. Warehouse warrant transaction premiums also rose to around $65-70/mt. It is reported that a large number of warehouse warrants will flow into domestic trade in the short term. After the implementation of the Fair Competition Review Regulations, the premium spread between warehouse warrants and bills of lading has narrowed in the short term.
In the domestic market, SHFE copper's contango structure showed a continued trend towards a backwardation structure last week. Due to the inflow of imported copper and the narrowing of the SHFE copper basis, some holders opted to profit by arbitraging, hindering the rise of spot premiums. Downstream processing enterprises exhibited noticeable restocking sentiment at low prices, demonstrating significant demand elasticity.
Looking ahead, the US August non-farm payrolls data and unemployment rate will provide more guidance on the rate cut extent in September. However, with the US elections approaching, related economic data may show temporary prosperity. Following continuous declines, the US dollar index may see a rebound. Under the influence of bearish capital market sentiment, copper futures may be under pressure. Fundamentally, entering September, the traditional peak consumption season for copper cathode will begin. Driven by Mid-Autumn Festival restocking demand, domestic spot premiums are likely to rise rather than fall.
