Expectations for September Interest Rate Cut Strengthen, While Tensions Over Fundamentals Intensify [SMM Macro Weekly Review]

This week, the macro front continued to dominate copper price fluctuations. At the Jackson Hole meeting, Fed Chairman Powell acknowledged pressure on the job market while emphasizing persistent inflationary pressures, prompting the market to strengthen expectations for a September interest rate cut, which drove the US dollar lower and pushed copper prices higher. Subsequently, Waller expressed support for a 25-basis-point rate cut in September and hinted at potential future cuts, further solidifying easing expectations. Meanwhile, Trump intensified his interventions in monetary and trade policies: his remarks on dismissing Fed Governor Cook raised concerns about central bank independence, and frequent signals of higher tariffs—potentially targeting furniture, steel, aluminum, and certain industrial products—increased trade uncertainty, weighing on copper prices. Geopolitically, the Russia-Ukraine peace process saw repeated setbacks, the "Trump-Putin summit" failed to materialize, and Trump's warnings of economic warfare against Putin fueled fluctuating risk-off sentiment. International oil prices rebounded continuously amid concerns over energy supply tightness, providing some support for commodities. Overall, LME copper traded sideways within $9,730–9,850/mt this week, while SHFE copper fluctuated around 78,700–79,500 yuan/mt, with macro easing expectations offering bottom support, though trade and geopolitical risks continued to cap upside room.

On the fundamentals side, China's copper cathode production saw only a slight decline in August, while September output is expected to face widespread production cuts due to tight copper anode supply, with an anticipated MoM drop of around 52,500 mt. Under the influence of Document No. 770, operating rates for secondary copper rod and scrap-based anode production both experienced significant pullbacks recently, highlighting the substitution effect of refined copper and supporting cathode consumption. Domestically, both copper prices and premiums remained high. Although increased arrivals of imported copper narrowed price spreads between brands, spot cargo availability stayed relatively tight.

Looking ahead to next week, the macro front is expected to remain quiet. Entering September, domestic fundamentals are anticipated to see strong consumption support, and if supply-side production cut expectations materialize, domestic inventory is likely to decline noticeably. Copper prices have solid bottom support. LME copper is forecast to fluctuate between $9,750–9,900/mt, while SHFE copper may range from 78,500–80,000 yuan/mt. On the spot side, short-term import replenishment is increasing while domestic arrivals are decreasing, but overall balance is still expected to remain tight. Spot prices against the SHFE copper 2509 contract are projected to range from a premium of 80 yuan/mt to 380 yuan/mt.