Expectations for US Fed interest rate cut heat up, boosting copper prices [SMM Copper Morning Meeting Summary]

Futures: LME copper opened at $9,690/mt overnight, fluctuating considerably in early trading and touching a high of $9,716/mt before gradually pulling back to hit bottom at $9,674/mt. Prices later rebounded to close at $9,708.5/mt, up 0.78%, with trading volume at 13,000 lots and open interest at 266,000 lots. The most-traded SHFE copper 2509 contract opened at 78,460 yuan/mt overnight, fluctuating considerably in early trading and reaching a high of 78,570 yuan/mt before gradually retreating to a low of 78,330 yuan/mt. Prices later rebounded to close at 78,370 yuan/mt, up 0.19%, with trading volume at 19,000 lots and open interest at 160,000 lots.

[SMM Copper Morning Briefing] News: (1) San Francisco Fed President Mary Daly said Monday that the timing for interest rate cuts is approaching, given increasing signs of softening in the US labor market and no persistent signs of tariff-driven inflation.

(2) US President Trump posted on his social media platform Truth Social that India not only buys large quantities of Russian oil but also sells most of it on the open market for huge profits. Therefore, he will significantly increase tariffs on Indian imports to the US.

Spot: (1) Shanghai: On August 4, SMM #1 copper cathode spot prices against the front-month 2508 contract were at premiums of 140-220 yuan/mt, averaging 180 yuan/mt, up 5 yuan/mt MoM. Shanghai inventories rose by 8,100 mt to 84,000 mt over the weekend, mainly replenished by imported cargoes. However, importers were not in a hurry to sell yesterday, and with selling pressure expected this week, the center of spot premiums for SHFE copper may decline.

(2) Guangdong: On August 4, Guangdong #1 copper cathode spot prices against the front-month contract ranged from discounts of 120 yuan/mt to premiums of 10 yuan/mt, averaging a discount of 55 yuan/mt, down 40 yuan/mt MoM. Overall, weak consumption and continuous inventory buildup kept trading sluggish, with spot premiums falling sharply.

(3) Imported copper: On August 4, warrant prices were $44-54/mt, QP August, averaging down $1/mt MoM; B/L prices were $54-66/mt, QP August, averaging down $1/mt MoM; EQ copper (CIF B/L) was $20-30/mt, QP August, averaging flat MoM. Offers referred to cargoes arriving in early to mid-August. Overall, the market saw weak supply and demand with no significant fluctuations.

(4) Secondary copper: On August 4, recycled copper raw materials prices remained flat MoM. Guangdong bare bright copper prices were 72,900-73,100 yuan/mt, unchanged from the previous trading day. The price difference between copper cathode and copper scrap was 780 yuan/mt, down 25 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 630 yuan/mt. According to the SMM survey, copper prices fluctuated throughout the day, while recycled copper raw materials remained firm, leading to secondary copper rod prices closing at a premium yesterday, with sluggish market transactions.

(5) Inventory: LME copper cathode inventories fell by 2,175 mt to 139,575 mt on August 1; SHFE warrant inventories dropped by 1 mt to 20,348 mt on August 4.

Prices: Macro-wise, US Fed's Daly stated that the timing for interest rate cuts is approaching, with the likelihood of more than two cuts this year. Goldman Sachs expects the US Fed to implement three consecutive 25-basis-point rate cuts starting from September, noting that a rise in the unemployment rate could trigger a 50-basis-point cut. Strengthened expectations for US Fed interest rate cuts provided support for copper prices. On the fundamentals, supply and demand remained weak. Supply side, arrivals of both imported and domestic copper increased, with SMM's nationwide mainstream copper inventories rising by 16,600 mt WoW to 135,900 mt as of August 4, though overall inventory levels remained low. Demand side, downstream purchase willingness weakened due to rising copper prices. In summary, despite inventory buildup and weak demand, macro tailwinds and low inventories are expected to provide support for copper prices today.

[Data source statement: Except for publicly available information, other data are derived from public information, market exchanges, and SMM's internal database model, processed by SMM for reference only and do not constitute decision-making advice.]

[The above information is based on market collection and comprehensive evaluation by the SMM research team. The information provided herein is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should exercise caution and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]