Interest Rate Cut Expectations and Supply Concerns Drive BC Copper Contract Sharply Higher [SMM BC Copper Review]

Today, the most-traded BC copper contract 2601 opened at 87,280 yuan/mt, dipped to 87,020 yuan/mt at the start of trading, then fluctuated considerably. After the day session opened, the center of copper prices gradually moved upward, approaching a high of 90,080 yuan/mt near the close, and finally settled at 88,630 yuan/mt, a gain of 3.41%. Open interest reached 2,830 lots, down 253 lots from the previous trading day, while trading volume reached 8,081 lots. Macro perspective, the US unemployment rate rose and inflation pulled back more than expected this week, further strengthening expectations for a January interest rate cut. Combined with the US dollar index trading at low levels, this boosted copper prices. Overseas copper continued to flow to North America, and expectations for copper cathode production cuts domestically jointly intensified market concerns about tightening global supply, pushing copper prices higher. On the fundamentals, supply side, the tight supply situation in the copper cathode market persisted, with limited circulating supply due to suppliers' low willingness to sell. Supply of high-quality copper was particularly tight. Demand side, copper prices again broke through high levels, leading to dismal downstream demand.

The most-traded SHFE copper contract 2601 settled at 98,600 yuan/mt. Based on the BC copper contract 2601 price of 88,630 yuan/mt, its after-tax price is 100,151 yuan/mt. The price spread between the SHFE copper 2601 contract and BC copper was -1,551; the spread remained inverted and narrowed compared to the previous day.