U.S. Economic Data Remains Weak; Copper Prices Break Through Resistance, Dragging Down Consumption [SMM Macro Weekly Review]

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        On the macro side, the US labor market in February showed an unexpected rise in the unemployment rate to 3.9%, but the non-farm payrolls data did not significantly impact market expectations. The CME FedWatch tool indicated that after the release of the non-farm data, the probability of the first interest rate cut in June rose to 52.6%, with the expected total number of rate cuts for the year remaining stable at three. The tariff policies intensively introduced by the Trump administration have raised concerns about persistent inflation, heightening market vigilance against "stagflation." Meanwhile, China released positive policy signals, with the government work report during the Two Sessions proposing measures to address cut-throat competition in the automotive market, expand NEV promotion, and implement stimulus policies for consumption. Coupled with technological upgrades and industry chain safeguard measures, these initiatives injected development momentum into the automotive industry. The market's focus shifted from short-term data to the effectiveness of medium and long-term policies and the resilience of the economy. Affected by a weak US dollar and expectations of a US recession, LME copper prices first declined and then rebounded during the week, surging to $9,850/mt by the week's end. The most-traded SHFE copper contract also rose sharply, breaking through the 80,000 yuan/mt threshold.
        On the fundamentals side, domestic copper concentrate port inventory continued to decline, while the copper cathode market returned to a subdued state. The high premiums in the offshore market contrasted with the SHFE/LME price ratio, and domestic downstream consumption lacked support. High premiums in regions such as Southeast Asia attracted continuous exports of domestic copper cathode. The price spread between domestic supplies and CME-registered B/L narrowed. Domestically, social inventory saw a slight destocking this week, but the destocking speed was slow due to high copper prices. Spot premiums continued to rise, with suppliers showing a clear sentiment to stand firm on quotes. The SHFE copper 2505 contract structure against the 2507 contract expanded to a backwardation of over 300 yuan/mt, and expectations of tight imports were transmitted to the domestic market.
        Looking ahead to next week, the US March FOMC meeting is approaching. Although the US Fed previously stated that economic data remains healthy, the balance between "stagflation" pressure and government bonds still leads the market to believe that a rate cut is highly likely. The US dollar index is expected to have further downside room, with LME copper prices fluctuating between $9,800-10,000/mt and SHFE copper prices ranging from 79,500-81,000 yuan/mt. In the spot market, next week marks the last trading day for the SHFE copper 2403 contract. Under high copper prices, consumption recovery in the spot market is suppressed, but reduced supply still gives suppliers the sentiment to stand firm on quotes. Spot prices against the SHFE copper 2504 contract are expected to range from a discount of 50 yuan/mt to a premium of 20 yuan/mt.

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