China-U.S. trade truce, copper prices fluctuate upward [Institution's Comment]

On Tuesday, the most-traded SHFE copper contract fluctuated upward, while LME copper broke through the $9,600 mark overnight and held up well. The domestic backwardation structure (B structure) for nearby months narrowed. On Tuesday, trading in the spot copper cathode market was lackluster, with downstream demand primarily driven by just-in-time procurement. Domestic trade copper maintained a discount of 10 yuan/mt. Yesterday, LME inventory fell to 189,000 mt. On the macro front: To implement the important consensus reached during the China-US economic and trade talks, China announced that it would reduce import tariffs on US goods from 34% to 10% starting from May 14, and suspend the implementation of a 24% tariff rate for 90 days. The China-US trade truce boosted global market risk appetite and supported commodity prices. In April, the US CPI rose 2.3% YoY, and the core CPI rose 2.8% YoY, both in line with expectations. Core inflation returned to its lowest growth rate in nearly four years, with food prices declining significantly in April. Sub-indices such as automobiles and clothing pulled back slightly, while housing inflation remained elevated, acting as a drag. The latest CME FedWatch Tool indicates that the probability of the US Fed keeping rates unchanged in June is over 90%. On the industrial front: According to customs data, China's imports of unwrought copper and copper semis reached 438,000 mt in April, with cumulative imports from January to April totaling 1.742 million mt, down 3.9% YoY.

The China-US trade truce boosted global market risk appetite and supported commodity prices. The central bank introduced a package of incremental financial policies to stabilize market confidence. On the fundamentals side, the outlook for the resumption of production at the Panamanian copper mine remains bleak. Global apparent copper cathode inventory is low, and the Yangshan copper premium remains high. Domestic end-use consumption exhibits characteristics of the peak season, providing strong support for copper prices. Copper prices are expected to hold up well in the short term.