Macro Risk-Averse Sentiment Suppresses Further Rise in Copper Prices, Frequent Fluctuations in Overseas Market During the Week [SMM Analysis]

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This week, on the macro side, US January retail sales data fell short of expectations, and news of Trump's proposal to expand tariff coverage raised market concerns about a trade war, although such concerns have gradually eased. Meanwhile, the US Fed maintained a cautious monetary policy stance, focusing on changes in inflation and economic conditions. The rise in US Treasury yields and the strength of the US dollar supported investors' risk-averse sentiment, leading to a recent pullback in copper prices. At the same time, with the ongoing Russia-Ukraine conflict, uncertainties about global economic growth persist, further impacting copper price trends.

From a fundamental perspective, the supply and demand situation in the copper market remains complex. Tight copper concentrate supply has driven spot prices for copper concentrates higher. However, seasonal inventory buildup during the Chinese New Year has limited domestic copper demand. Additionally, weak domestic and international economic data and policy uncertainties have slowed copper consumption growth, particularly against the backdrop of a deteriorating imported copper cathode export window. According to data from the LME copper futures market, copper futures prices have recently experienced another pullback, with SHFE copper contract import losses rapidly expanding to over 1,300 yuan/mt, indicating that the export window has reopened. Since May 2024, the export window for copper cathode has significantly widened, driving substantial export volumes. Nevertheless, due to factors such as tight copper concentrate supply and cost pressure on smelters, the increase in exports is unlikely to reach historical highs.

Looking ahead, the copper market is expected to continue facing complex macroeconomic and fundamental challenges. The US dollar index remains a key factor influencing copper prices, especially as changes in US Treasury yields directly affect the strength of the US dollar. If the US Fed continues its tightening policy, the US dollar may strengthen further, exerting pressure on copper prices. Meanwhile, the performance of China's Treasury market will also impact the RMB exchange rate, thereby affecting the cost of imported copper and export volumes. Although copper fundamentals receive some support, uncertainties in the global economy and concerns about demand growth prospects may lead to continued volatility and adjustments in copper prices. Changes in domestic policies, particularly the government's support for infrastructure investment and private enterprises, could also bring certain benefits to the copper market.