Substantial progress has been made in China-US trade talks, with easing signals released on the macro front [SMM Weekly Macro Review]

On the macro front, substantive progress was made in the economic and trade talks between China and the US held in Geneva. Both sides issued a joint statement announcing that they would synchronously adjust the hefty tariffs recently imposed on each other's goods before May 14, 2025. The US will suspend for 90 days the implementation of the planned 24% ad valorem tariff increase on Chinese goods, retaining the remaining 10% tariff, while canceling the further tariff increases on Chinese goods outlined in two executive orders issued on April 8 and 9 (the cumulative tariff had already reached 125%). China has responded in kind by suspending the 24% tariff increase on US goods, retaining the 10% tariff, and canceling other non-tariff countermeasures. Overall, both sides have sent a clear signal of easing economic and trade frictions and buying time and space for negotiations. Meanwhile, other global economies are also accelerating adjustments to their trade policies in response to the US-led trade reshaping at the geopolitical level. The India-Pakistan conflict has eased, and the Russia-Ukraine conflict is also showing signs of peace. On the whole, major economies are demonstrating a certain willingness to coordinate on multilateral issues, and the geopolitical situation is showing a slowdown trend.

On the fundamental front, due to the release of copper concentrates from Grasberg, copper concentrate imports in April hit a record high, and inventory buildup at ports increased significantly. However, in the long term, the tight supply situation remains unchanged, and spot transactions of copper concentrates have been sluggish in the short term. After the delivery of the SHFE copper 2405 contract, spot premiums started at 400 yuan/mt, putting pressure on downstream enterprises' purchase willingness. Due to the easing of tariff conflicts, the number of vessel bookings on the US West Coast route has increased significantly, and whether end-use consumption can be transmitted upstream has become a core concern in May.

Looking ahead to next week, the current macro sentiment is mixed with bullish and bearish factors. After recovering from previous losses, LME copper is fluctuating rangebound. Expectations for a 25 basis point interest rate cut by the US Fed in June have increased, and it is anticipated that the US dollar index's rebound will put downward pressure on copper prices. LME copper is expected to fluctuate between $9,250-9,550/mt next week, while SHFE copper is expected to fluctuate between 76,500-78,000 yuan/mt. On the spot front, the release of warrants after the delivery of the SHFE copper 2505 contract and the concentrated arrivals of imported copper will impact spot premiums. Given the still significant price spread between futures contracts for the SHFE copper 2506 and 2507 contracts, it is expected that spot premiums will gradually converge towards parity. Spot prices against the SHFE copper 2506 contract are expected to range from a premium of 250-450 yuan/mt.