US Fed's Dovish Stance; Copper Prices Continue to Rise [Institutional Commentary]

On Wednesday, the most-traded SHFE copper contract fluctuated upward, LME copper approached the $10,000 mark, and COMEX copper surpassed 510¢/lb. The domestic near-month April-May price spread slightly widened. On Wednesday, transactions in the copper cathode spot market were stagnant, as the rapid short-term rise in copper prices weakened downstream restocking efforts, and spot premiums fell to 20 yuan/mt. Yesterday, LME inventory dropped to 225,000 mt.

Macro perspective: The US Fed's March meeting kept the interest rate range unchanged at 4.25%-4.5%. Powell stated that the US economy remains strong, but economic uncertainties have increased. The labour market conditions are solid, with the unemployment rate in a narrow range. Inflation continues to make progress but remains above the target. Determining the impact of tariffs on inflation expectations is challenging. The Fed does not need to rush to adjust its policy stance in the short term. If the labour market unexpectedly weakens, it can ease policies when necessary. The latest dot plot indicates approximately two interest rate cuts this year. Powell's overall dovish remarks boosted market risk appetite.

The Bank of Japan maintained its key policy rate at 0.5% in March. The BOJ stated that the current US tariff policy is impacting the global economy and will continue to assess the potential effects of tariffs on Japan's export-dependent economy.

Industry perspective: Southern Copper announced that a group of informal miners attacked facilities at its exploration project in southern Peru, injuring 20 workers and security personnel. The Los Chancas mining camp was briefly engulfed in flames.

The Fed's March decision to hold steady and its lack of excessive concern over tariff-induced inflationary pressures, combined with the dot plot showing two interest rate cuts this year, have recently driven active trading on COMEX copper tariff premium expectations. Additionally, some copper smelters in China have implemented production cut plans, boosting bullish sentiment. On the fundamentals side, the growth rate of mine supply continues to be revised downward, TC negative values have expanded, and domestic social inventory has turned downward. LME copper is approaching the $10,000 mark. Copper prices are expected to fluctuate upward in the short term, but caution is advised regarding potential price corrections due to expectations of a mild US economic recession.