Uncertainties increased ahead of China-US tariff negotiations; copper prices jumped initially and then pulled back during the week [SMM Macro Weekly Review]

   On the macro front, Trump frequently adjusted his stance on trade policies, proposing a tiered tariff plan ranging from 15% to 50% for multiple countries. Despite expressing a willingness to remove clauses for some allies like Japan, the overall policy approach remained dominated by high-pressure negotiations. Meanwhile, the EU announced its intention to impose retaliatory tariffs on US products worth 93 billion euros before August 7, escalating market concerns about a global trade conflict. The potential for a new round of trade agreement negotiations between China and the US also became a focal point of market attention. Regarding the US Fed, despite White House economic advisors repeatedly denying rumors of Powell's dismissal, Trump's repeated high-profile pressure and demands for a 300-basis-point interest rate cut heightened market concerns about the Fed's independence. Policy negotiations and public opinion interference continued to sway market sentiment. Domestically, the "anti-rat race" directive spurred a general rally in the non-ferrous metals sector. This week, LME copper jumped initially and then pulled back, rising to around $9,900/mt mid-week before pulling back to $9,800/mt. Market sentiment remained cautious about macro uncertainties. SHFE copper also faced resistance at the 80,000 yuan/mt level, with an overall slower pace of movement.

   On the fundamental front, spot TC for copper concentrates rebounded again this week, while buyer activity declined. Market traders mostly awaited the final outcomes of next week's tariff negotiations between the US and Chile, as well as between China and the US, keeping the market sluggish overall. Domestically, social inventory unexpectedly decreased significantly this week, but consumption lacked strong support based on copper prices and downstream operating rates. According to SMM, this may be due to reduced imports. Overall, both upstream and downstream sectors were sluggish this week, with a strong wait-and-see sentiment prevailing in the market.

   Looking ahead to next week, market focus will continue to center on further clarity in tariff negotiations and the Fed's policy stance in early August. Following the implementation of tariff details, a window for tariff-based interest rate spread trading is expected to open widely, potentially reshaping global trade flows in H2. Copper prices are unlikely to receive directional guidance in the short term. It is expected that LME copper will fluctuate between $9,600 and $9,900/mt, while SHFE copper will fluctuate between 77,000 and 79,500 yuan/mt. On the spot front, with inventory remaining at low levels and trade flows disrupted, price spreads between brands remain large. However, weak consumption will drive the overall center downward. It is expected that spot prices against the SHFE copper 2508 contract will range from a discount of 20 yuan/mt to a premium of 180 yuan/mt.