Overseas Macro Uncertainty Remains High, Copper Prices Face Upward Pressure [SMM Copper Morning Meeting Notes]

Futures Market: Last Friday evening, LME copper opened at $9,263/mt, initially reaching a high of $9,274/mt before trending downward to a low of $9,124/mt. It slightly rebounded at the close, settling at $9,181.5/mt, down 0.69%. Trading volume reached 23,000 lots, and open interest stood at 287,000 lots. Last Friday evening, the most-traded SHFE copper 2503 contract opened at 76,340 yuan/mt, initially hitting a high of 76,380 yuan/mt before declining to an intraday low of 75,540 yuan/mt. It slightly rebounded at the close, settling at 75,800 yuan/mt, down 0.76%. Trading volume reached 42,000 lots, and open interest stood at 165,000 lots.

【SMM Copper Morning Brief】News: (1) With the US debt ceiling approaching, Treasury Secretary Janet Yellen announced the initiation of extraordinary measures to avoid a debt default.

(2) The Ministry of Commerce and seven other departments announced that scrapping eligible old vehicles and purchasing passenger NEVs this year will be subsidized by 20,000 yuan. Transferring ownership of a personal vehicle and purchasing a new car this year will be subsidized up to 15,000 yuan.

Spot Market: (1) Shanghai: On January 17, spot #1 copper cathode premiums against the SHFE copper 2502 contract were quoted at 60-110 yuan/mt, with an average of 85 yuan/mt, down 5 yuan/mt from the previous trading day. Spot premiums declined as expected on January 17, with overall weak market consumption. However, as the contango structure widened, suppliers' holding costs decreased, and some were reluctant to sell at low prices. Overall trading sentiment was sluggish, with some companies turning to the US dollar copper market for pre-holiday restocking, while domestic trade sentiment remained weak. Spot premiums are expected to decline further on Monday.

(2) Guangdong: On January 17, Guangdong spot #1 copper cathode premiums against the front-month contract were quoted at a discount of 150 yuan/mt to parity, with an average discount of 75 yuan/mt, down 25 yuan/mt from the previous trading day. Overall, with more end-users on holiday, suppliers lowered prices to sell, but actual transactions remained sparse.

(3) Imported Copper: On January 17, warehouse warrant prices were $71-81/mt, QP February, with an average unchanged from the previous trading day. B/L prices were $56-70/mt, QP February, also unchanged. EQ copper (CIF B/L) was quoted at $6-20/mt, QP February, with the average unchanged, referencing cargoes arriving in late January and early February. On January 17, the SHFE/LME price ratio against the SHFE copper 2502 contract was around -600 yuan/mt. LME copper 3M-Feb was at C$62.87/mt, and the SHFE copper 2502-2503 date spread was around C$35/mt. The SHFE/LME price ratio continued to deteriorate on January 17, with few market offers. Post-holiday transactions were scattered, as expectations for weaker supply after the holiday persisted, keeping the trading center unchanged from the previous day.

(4) Secondary Copper: On January 17, secondary copper raw material prices remained unchanged MoM. Guangdong bare bright copper prices were 68,900-69,100 yuan/mt, unchanged MoM. The price difference between primary metal and scrap was 3,071 yuan/mt, up 475 yuan/mt MoM. The rod price difference was 1,795 yuan/mt. According to the SMM survey, as COMEX contract prices continued to rise, the price spread between COMEX and LME contracts widened to a historical high. Many import traders indicated that most US market quotes this week shifted to LME coefficient pricing. The timeline for reverting to the original COMEX contract price minus remains dependent on the narrowing of the price spread.

(5) Inventory: On January 17, LME copper cathode inventories decreased by 175 mt to 260,075 mt. SHFE warehouse warrant inventories decreased by 24 mt to 15,191 mt.

Prices: Macro side, supported by the resilience of the US economy and employment, expectations for US Fed interest rate cuts in January paused. The US Fed's monetary policy outlook gradually shifted to a hawkish stance. Before further data validation, the market is likely to lean toward a hawkish sentiment, which is bearish for copper prices. Fundamentals, supply side, market liquidity improved compared to earlier, but tight supply sentiment persisted. On the consumption side, as year-end approached, spot market transactions were moderate. Additionally, last Friday's intraday copper price gains further weakened downstream consumption. Spot premiums are expected to decline today. On the price side, with the new president taking office, the timing of domestic monetary policy adjustments remains uncertain. Copper prices are expected to face some resistance today.

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