US finally imposes copper tariffs; copper prices fluctuate downward amid macro front disturbances [SMM Macro Weekly Review]

On the macro front, the US dollar has rebounded continuously, supported by strong US economic indicators such as June's non-farm payrolls and manufacturing data. The US and Europe reached a 15% reciprocal tariff agreement, boosting risk appetite, and also reached a large number of resource procurement agreements with Japan and South Korea. However, the US Fed's decision to maintain interest rates unchanged has put pressure on copper prices. Meanwhile, the US announced a 50% tariff on semi-finished copper (with refined copper exempted) starting from August 1, leading to a significant decline in COMEX copper prices and a basic convergence of the LME-COMEX price spread. The market is also paying attention to the short-term support for copper prices from Trump's increased pressure on Russia over the Ukraine situation and the significant rise in international oil prices. Overall, the US-Europe trade and tariff disputes, the US Fed's monetary policy path, and inflation trends are the main driving factors behind the current volatile and bearish copper prices. This week, LME copper prices have pulled back from around $9,850/mt to around $9,600/mt, while the most-traded SHFE copper contract has pulled back from nearly 79,000 yuan/mt to around 78,000 yuan/mt.

On the fundamental front, the production of major miners increased MoM in Q2, alleviating the tightness in copper concentrates. After the implementation of US copper tariffs, the LME contango structure deepened, and offshore market activity increased. Domestically, copper cathode production in July reached a record high, but inventory did not show significant buildup, indicating strong off-season consumption support. Overall, both upstream and downstream sectors have shown signs of recovery this week, with demand increasing after copper prices declined and the impact of macro factors weakening.

Looking ahead to next week, the macro front is expected to be quiet, with PMIs from multiple countries to be released. Since global PMIs returned to expansion territory in June, there has been a certain degree of recovery in global manufacturing. With fundamental support, copper prices are expected to have strong support at lower levels. It is anticipated that LME copper prices will fluctuate between $9,550-$9,750/mt, and SHFE copper prices will fluctuate between 77,500-78,500 yuan/mt. On the spot front, the SHFE near-month structure is shifting towards BACK, with social inventory remaining low overall. A decline in copper prices may drive an increase in processing enterprise operations. Spot prices against the SHFE copper 2508 contract are expected to range from a premium of 0 yuan/mt to 180 yuan/mt.