Interest Rate Cut Expectations and Inventory Disruptions Drive LME Copper to Another Record High [SMM Macro Weekly Review]

Copper prices hit another record high this week, with LME copper breaking through the $11,200/mt mark and continuing to surge, testing $11,700/mt on Friday, while SHFE copper also rose sharply to just below 93,000 yuan/mt. Overall performance was very strong during the week. From a macro perspective, renewed expectations for US Fed interest rate cuts were the main driver. Trump's plan to nominate a dovish candidate as Fed Chairman, Treasury Secretary Yellen's clear signals of interest rate cuts, and ADP employment data significantly below expectations collectively strengthened market bets on a 25-basis-point rate cut in December. The persistently low ISM manufacturing PMI indicated weak economic momentum, and the US dollar index remained under pressure and pulled back throughout the week, providing clear support for copper prices.

On the fundamental side, long-term contract negotiations for copper concentrates remained unresolved, with market sources indicating that mines' latest offer for next year's long-term TC was -$15/mt. Meanwhile, several miners lowered their medium-term production forecasts. A large number of cancelled warrant requests emerged at LME warehouses mid-week, hinting at the early formation of a scenario with high copper prices and a high backwardation. On the demand side, rapid copper price increases suppressed activity, prompting downstream enterprises to adopt a more cautious procurement approach, with transactions primarily driven by just-in-time needs.

Looking ahead to next week, with the US Fed's policy meeting approaching, the combination of interest rate cut expectations and fundamental tightness suggests that LME copper still has upside room, and the pattern of overseas market outperforming domestic market may deepen further. LME copper is expected to fluctuate between $11,200/mt and $12,000/mt, while SHFE copper is projected to trade between 90,500 yuan/mt and 94,500 yuan/mt. For spot markets, downstream acceptance of high premiums and high copper prices is limited, and end-use consumption continues to rely on just-in-time procurement, yet inventory tightness remains a reality. Spot prices against the SHFE copper 2512 contract are expected to range from a premium of 20 yuan/mt to a premium of 280 yuan/mt.