US Dollar Index Hits New Highs, Copper Prices Under Pressure, While Raw Material Port Maintains Tight Sentiment [SMM Macro Weekly Review]

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       In terms of macroeconomics, US initial jobless claims last week fell to an eight-month low, and the final December S&P Global Manufacturing PMI stood at 49.4, higher than the expected 48.3. The impending end of the debt ceiling suspension brought the US debt expansion issue back into market focus. Influenced by the hawkish stance of the US Fed's December meeting, the US dollar index surged significantly, closing the week above the 109 mark. The 10-year US Treasury yield declined sharply. Market trading on policy uncertainties for 2025 increased, while gold and crude oil prices also climbed during the week, and the non-ferrous metals market broadly declined. LME copper fell from $9,000/mt to around $8,750/mt. Domestically, although China's December official Manufacturing PMI and Caixin Manufacturing PMI both came in below market expectations, they remained stable above the 50 mark. The resilience of the fundamentals provided support for the copper market. SHFE copper declined from 74,000 yuan/mt to around 73,000 yuan/mt during the week, with strong support at the bottom.

       On the fundamentals, the copper concentrate index continued to decline this week, and the spot market saw sluggish transactions. Overseas blister copper long-term contract BM settled below three digits for the first time in recent years. Sentiment around tight raw material supply showed no signs of easing. For copper cathode, the import profit window remained open due to the decline in the overseas market, but most near-port cargoes were locked for import, leading to inactive spot trading. In the domestic market, as the new year began, market transaction activity increased, and traders' restocking demand pushed spot premiums significantly higher, though end-use demand continued to cool. Looking ahead to next week, the strong US dollar is expected to keep pressuring copper prices. If US December non-farm payrolls maintain rapid growth, it is expected to further weigh on copper prices. LME copper is expected to fluctuate between $8,700-9,000/mt, while SHFE copper is expected to range from 72,500-74,000 yuan/mt. In the spot market, the large arrival of imported copper is expected to continue impacting spot premiums, while the gradual weakening of downstream consumption before the Chinese New Year is also expected to drag down premiums. Spot prices against the SHFE copper 2501 contract are expected to remain between a premium of 0 yuan/mt and a premium of 70 yuan/mt.
 

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