US Fed Slows Down Balance Sheet Reduction Pace, LME Copper Drops Back Slightly [SMM Copper Morning Meeting Summary]

Futures Market: LME copper opened at $9,934/mt overnight, reaching a high of $9,986.5/mt before fluctuating downward to a low of $9,906/mt, and finally closing at $9,910/mt. This was a decrease of $87.5/mt, or 0.87%, from the previous close of $9,997.5/mt. The SHFE 2505 contract opened at 81,310 yuan/mt, reached a high of 81,420 yuan/mt, and a low of 81,020 yuan/mt. The latest price was 81,310 yuan/mt, down 40 yuan/mt, or about 0.49%, from the previous close of 81,670 yuan/mt. Trading volume was 44,832, and open interest was 243,630. Overall, prices showed significant volatility after the opening, initially dropping to a low point, followed by a fluctuating trend. [SMM Copper Morning Meeting Summary] News: (1) The National Bureau of Statistics (NBS) reported that China's copper semis production in January-February 2025 was 3.163 million mt, the highest level for the same period in recent years. Although the Chinese New Year came early this year, with downstream processing enterprises starting their holidays from late January, the copper semis production in the first two months was still considerable compared to the same period last year. Spot: (1) Shanghai: On March 20, the mainstream standard-quality copper was quoted at a discount of 30 yuan/mt to parity against the front-month contract, while high-quality copper was quoted at a premium of 10 yuan/mt to 30 yuan/mt. According to SMM, the destocking speed of domestic social inventory slowed down this week. The sustained rise in copper prices has put pressure on end-use consumption. However, the premium difference between Guangdong and Shanghai has widened significantly, and it is expected that some suppliers will take the opportunity to ship cargo from east China to south China. It is anticipated that the premium will remain around parity tomorrow. (2) Guangdong: On March 20, #1 copper cathode spot prices in Guangdong were quoted at a premium of 160 yuan/mt to 210 yuan/mt against the front-month contract, with an average premium of 185 yuan/mt, up 55 yuan/mt from the previous trading day. SX-EW copper was quoted at a premium of 80 yuan/mt to 100 yuan/mt, with an average premium of 90 yuan/mt, up 70 yuan/mt from the previous trading day. The average price of #1 copper cathode in Guangdong was 81,605 yuan/mt, up 1,030 yuan/mt from the previous trading day, and the average price of SX-EW copper was 81,510 yuan/mt, up 1,045 yuan/mt from the previous trading day. Overall, with reduced supply, suppliers stood firm on quotes, stimulating a significant increase in premiums, but overall trading was poor. (3) Imported Copper: On March 20, warrant prices were 60-70 $/mt, QP April, with the average price up $5/mt from the previous trading day; B/L prices were 86-100 $/mt, QP April, with the average price up $6/mt from the previous trading day. EQ copper (CIF B/L) was 30-40 $/mt, QP April, with the average price up $5/mt from the previous trading day. Quotations referred to shipments arriving in mid-to-late March and early April. The market performance was similar to the previous day, with scattered offers and generally high real transactions. Suppliers' willingness to sell was very low, mainly focusing on limited support for long-term contracts. (4) Secondary Copper: On March 20, the price of secondary copper raw material increased by 700 yuan/mt MoM. The price of bare bright copper in Guangdong was 74,000-74,200 yuan/mt, up 700 yuan/mt from the previous trading day. The price difference between primary metal and scrap was 2,680 yuan/mt, up 50 yuan/mt MoM. The price difference between refined and secondary copper rod was 2,075 yuan/mt. According to the SMM survey, secondary copper rod enterprises indicated that traders continued to pick up goods normally. Additionally, the price difference between refined and secondary copper rod exceeded 2,000 yuan/mt, stimulating some procurement sentiment among wire and cable enterprises, but the order volumes were relatively small, mainly just-in-time procurement. (5) Inventory: On March 20, LME copper inventories decreased by 1,900 mt to 223,275 mt. SHFE warrant inventory decreased by 4,359 mt to 154,136 mt. Prices: On the macro side, the US Fed will start to slow the pace of balance sheet reduction from April 1. In his press conference, Fed Chairman Powell also released many policy signals. He stated that the US economy is strong but uncertain, and the risk of economic recession has "risen, but is not high." The Fed is at a stage where it can cut interest rates or maintain its current policy stance, but it will not rush to cut rates. Trump also urged the Fed to cut interest rates, and market concerns about a US economic recession have eased, with the US dollar index rising again, putting pressure on copper prices. On the fundamental side, the sustained rise in copper prices has suppressed end-use consumption, and the destocking of social inventory has slowed. Meanwhile, in the southern region, due to reduced supply, consumption remains moderate, and inventory continues to decline, with premiums remaining high. Some suppliers may take the opportunity to ship cargo from east China to south China. As of Thursday, March 20, SMM's national mainstream copper inventories decreased by 2,600 mt to 346,400 mt from Monday, and by 9,100 mt from the previous Thursday, achieving three consecutive weeks of weekly destocking. Currently, it has pulled back 30,600 mt from the annual high and is 48,600 mt lower YoY. In summary, with the US dollar index stabilizing, physical buying is suppressed by high copper prices, and it is expected that the upside for copper prices today may be limited. [The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not rely solely on this information. Any decision made by clients is unrelated to SMM.]