US Interest Rate Cuts Expected to Increase, Supporting Copper Prices [SMM Copper Morning Meeting Summary]

Futures Market: Overnight, LME copper opened at $9,259/mt, fluctuated downward initially, hitting a low of $9,210/mt during the session. It then rebounded and fluctuated upward, reaching a high of $9,267.5/mt before pulling back and rebounding again, finally closing at $9,245/mt, up 0.3%. Trading volume reached 20,000 lots, and open interest stood at 286,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 76,300 yuan/mt, hit a low of 76,070 yuan/mt initially, then fluctuated upward, reaching a high of 76,500 yuan/mt during the session. Subsequently, the price center shifted downward amid fluctuations, and the contract closed at 76,280 yuan/mt, up 0.49%. Trading volume reached 27,000 lots, and open interest stood at 167,000 lots.

【SMM Copper Morning Brief】News: (1) Data released by the US Department of Commerce showed that US retail sales in December rose 0.4% MoM, below the expected 0.6% and the previous value of 0.7%, mainly due to a drag from building materials and food services. However, 10 out of 13 categories in the report showed growth, with auto sales continuing to surge, indicating strong consumer demand during the holiday season. (2) Detailed implementation rules for subsidies supporting new purchases in the automotive sector are scheduled to be released this Friday. On the previous day, at a press conference on "China's High-Quality Economic Development Achievements" held by the State Council Information Office, Li Gang, Director of the Department of Market Operation and Consumption Promotion of the Ministry of Commerce, stated that the Ministry of Commerce would successively issue detailed implementation rules this week for 2025 subsidies to support new purchases of automobiles, home appliances, home furnishings, electric bicycles, and digital products such as mobile phones.

Spot Market: (1) Shanghai: On January 16, #1 copper cathode spot prices against the front-month 2502 contract were quoted at a premium of 70-120 yuan/mt, with an average premium of 90 yuan/mt, up 30 yuan/mt MoM. Trading sentiment was muted yesterday, with weak buying interest amid high copper prices. The market is concerned about insufficient stocking demand from enterprises before the Chinese New Year, and premiums are expected to continue declining in the short term.

(2) Guangdong: On January 16, Guangdong #1 copper cathode spot prices against the front-month contract were quoted at a discount of 100 yuan/mt to parity, with an average discount of 50 yuan/mt, down 75 yuan/mt MoM. Overall, downstream demand continued to shrink, forcing suppliers to lower prices, resulting in poor overall trading activity.

(3) Imported Copper: On January 16, warehouse warrant prices were $71-81/mt, QP January, with the average price flat MoM; B/L prices were $56-70/mt, QP February, with the average price down $3/mt MoM; EQ copper (CIF B/L) was quoted at $6-20/mt, QP February, with the average price flat MoM. Quotes referenced cargoes arriving in late January and early February. As copper prices surged, the SHFE/LME price ratio weakened, and some suppliers turned bearish on future consumption, leading to a pullback in the trading center for long-term B/L. Warehouse warrant quotes remained firm, with the SHFE/LME price ratio against the SHFE copper 2502 contract at approximately -100 yuan/mt.

(4) Secondary Copper: On January 15, secondary copper raw material prices remained unchanged MoM, with Guangdong bare bright copper prices at 68,600-68,800 yuan/mt, also unchanged MoM. The price difference between primary metal and scrap was 2,250 yuan/mt, down 180 yuan/mt MoM. The price difference between primary and secondary copper rods was 1,510 yuan/mt. According to the SMM survey, despite the pullback in copper prices, many secondary copper rod plants reported receiving a small number of orders from terminal wire and cable factories this week. Secondary copper enterprises plan to start their Chinese New Year holidays after the Little New Year, focusing on completing inventory orders before the holiday. Currently, they have no plans to build finished product inventories.

(5) Inventory: On January 15, LME copper cathode inventories decreased by 1,150 mt to 260,750 mt. On the same day, SHFE warehouse warrant inventories decreased by 246 mt to 9,484 mt.

Prices: Macro side, the overall US CPI YoY growth rate mildly rebounded to 2.9%, while the core CPI YoY growth rate unexpectedly fell to 3.2%, below expectations. This eased concerns about accelerating inflation, leading traders to increase bets on a US Fed interest rate cut in June, with the likelihood of two rate cuts this year rising. Following the data release, the US dollar index briefly fell below the 109 mark, boosting overnight copper prices. Fundamentals side, year-end consumption remained weak, and market activity further declined amid contract rollover. Overall, with the US dollar index pulling back and then recovering, copper prices are expected to have limited upside today.

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【The above information is based on market data collected and comprehensively evaluated by the SMM research team. The information provided herein is for reference only and does not constitute direct investment research advice. Clients should make prudent decisions and not substitute this information for independent judgment. Any decisions made by clients are unrelated to SMM.】