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On the macro side, US core CPI in January rose 0.45% MoM and increased to 3.26% YoY, exceeding market expectations, indicating persistent inflationary pressure. The CPI data reinforced market expectations for the US Fed to maintain its tightening policy, with the timing of rate hikes possibly delayed to Q4. Fed Chairman Jerome Powell emphasized the need to observe policy effects and temporarily paused the pace of interest rate cuts. Former President Trump signed a memorandum introducing "reciprocal tariffs," imposing additional tariffs on steel, aluminum, and automobiles, though a buffer period mitigated short-term impacts. Concerns over tariff-related issues continued to push up LME copper, which rose from around $9,400/mt to approximately $9,500/mt during the week. Domestically, with the Two Sessions approaching, domestic policies focused on a "moderately loose monetary policy" and increased power grid investment. The most-traded SHFE copper contract also showed an upward trend this week, surging from around 76,500 yuan/mt to a peak of 78,000 yuan/mt.
On the fundamentals side, recently, the Indonesian government approved Freeport to resume copper concentrate exports. Freeport plans to ship copper concentrates to China starting in February and is expected to obtain a new export license by the end of February. This move is likely to ease the global tight supply of copper concentrates and reduce pressure on smelters' TC. For copper cathode, the SHFE/LME price ratio continued to decline, leading to an expansion of domestic import losses. The US dollar-denominated copper market saw reduced activity, with smelters closely monitoring the timing of the export window opening. In domestic trade, the SHFE copper contango structure widened, attracting market participants to engage in long-term borrow arbitrage, while spot transactions remained sluggish. Suppliers mainly focused on spot premiums after delivery.
Looking ahead, US tariff developments remain a key concern. The price spread between LME 3M and COMEX most-traded contracts has exceeded $900/mt, providing strong upward momentum for LME copper. It is expected to fluctuate between $9,450-9,650/mt next week, while SHFE copper is projected to trade within 76,500-78,500 yuan/mt. Domestically, next week marks the last trading day for the SHFE copper 2502 contract, and spot premiums are expected to be suppressed below discounts due to short-term inventory destocking challenges after delivery. Spot prices against the SHFE copper 2403 contract are expected to range from a discount of 120 yuan/mt to a discount of 50 yuan/mt.
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