US Dollar Index Drops Back Slightly from Highs, Boosting Copper Prices; Spot Market Gradually Cools Down During the Week [SMM Macro Weekly Review]

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         In terms of macroeconomics, the US December CPI YoY growth rate mildly rebounded to 2.9%, while the core CPI YoY growth rate unexpectedly pulled back to 3.2%. The US dollar index rose to 110 points at the beginning of the week and then gradually dropped back to around 109 points. Long-term US Treasury yields fell sharply, providing short-term upward momentum for copper prices. The US Beige Book indicated that US employment remained strong, and inflation progress was encouraging. Data released on Wednesday showed that a key measure of underlying inflation slowed for the first time in six months. LME copper rose from around $9,100/mt to around $9,250/mt during the week. In China, data released by the National Bureau of Statistics (NBS) showed that the domestic GDP grew by 5.0% YoY in 2024, with Q4 consumption showing a recovery trend and the effects of stimulus policies becoming evident. The fundamentals showed a steady improvement. SHFE copper rose from 75,000 yuan/mt to 76,000 yuan/mt during the week.

        On the fundamentals side, the copper concentrate market was active this week, with domestic smelters actively seeking supplies, and spot demand continued to push processing fees downward. For copper cathode, the price spread between Comex and LME remained high this week, prompting some traders to ship LME cargoes to North America. Meanwhile, inventories in China's bonded zones hit bottom, supporting Yangshan copper premiums. In the domestic market, spot premiums against the SHFE copper 2401 contract dropped back slightly after delivery, as rising copper prices dampened some downstream pre-holiday restocking sentiment. Looking ahead to next week, the overseas macro environment is expected to remain quiet overall, with the market anticipating follow-up tariff policies after Trump takes office. Meanwhile, the Bank of Japan will announce its interest rate decision next week, and the US dollar index faces some resistance above. LME copper is expected to fluctuate between $9,200-9,350/mt, while SHFE copper is expected to range from 75,500-76,500 yuan/mt. In the spot market, as the countdown to the Lunar New Year holiday begins, the spot market is expected to gradually quiet down. Spot prices against the SHFE copper 2501 contract are expected to remain at a premium of 50-120 yuan/mt.

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