U.S. Government Shutdown Finally Ends, US Dollar Index Weakens and Copper Prices Rise [SMM Macro Weekly Review]

Copper prices rose overall this week, with a relatively quiet macro front. The market primarily focused on the US government ending its shutdown. Mid-week, the Senate and House of Representatives successively passed a temporary funding bill, leading to the US government resuming operations and a significant easing of risk-off sentiment. The US dollar index came under pressure and declined. As the consumer confidence index fell to a three-year low and the labor market continued to cool, expectations for a US Fed interest rate cut heated up again, providing support for copper prices.

On the fundamentals side, copper concentrate transactions recovered somewhat compared to before, with spot TC edging down. Following the approval of the 400,000 mt copper concentrate export permit for Amman Copper, some Batu copper concentrate offers emerged and were traded. Port operational efficiency in Tanzania remains relatively low, and China's copper cathode imports are expected to decrease significantly from late November. Domestically, overall supply is relatively loose, but high-quality copper resources remain tight. On the demand side, purchasing sentiment was volatile due to copper prices fluctuating at highs, and end-user digestion capacity was limited.

Looking ahead to next week, while the US government shutdown has ended on the macro front, liquidity in capital markets has not been fully released. A weaker US dollar index is expected to provide support for copper prices. LME copper is forecast to fluctuate between $10,650-11,000/mt, and SHFE copper between 86,000-89,000 yuan/mt. On the spot side, next Monday is the last trading day for the SHFE copper 2511 contract. The current contango structure for SHFE copper has widened; premiums are expected to rise on the contract rollover day, but are anticipated to weaken continuously after the rollover due to a lack of significant consumption recovery. Spot prices against the SHFE copper 2511 contract are expected to range from a discount of 10 yuan/mt to a premium of 180 yuan/mt.