U.S. Tariff Increase Expectations Weaken, Copper Inventory Buildup During Holiday Significantly Exceeds Expectations [SMM Macro Weekly Review]

During the Chinese New Year holiday, LME copper was under pressure and pulled back due to Trump's tariff remarks and a continuous increase in LME inventory; subsequently, the US Supreme Court ruled that large-scale tariff hikes were illegal, the US dollar weakened, and short covering pushed prices to rebound quickly above $13,300/mt. Thereafter, under the intertwined influence of progress in US-Iran negotiations and geopolitical tensions, market sentiment swung between bullish and bearish, with LME copper fluctuating within the range of $13,200-13,350/mt. In terms of open interest structure, during the rebound phase, it was mainly characterized by short positions being reduced, and after reaching new highs, there were signs of long positions being cut, indicating a cautious mindset among investors. The continuous accumulation of LME inventory put downward pressure on prices, while domestic transactions had not fully recovered post-holiday, and high prices still suppressed demand. Overall, copper prices lacked unidirectional drivers and were expected to fluctuate at highs in the short term.

Fundamentally, domestic inventory increased more than expected during the Chinese New Year holiday, with social inventory in the region breaking through 500,000 mt post-holiday, and slow resumption of operations downstream also led to an accumulation of in-factory inventory, resulting in weak purchasing sentiment. As a result, premiums for domestic trade dropped significantly. Currently, all three markets, LME, COMEX, and SHFE, exhibit a deep Contango structure, reflecting weaker expectations for current demand.

Looking ahead to next week, with the lack of unidirectional momentum for copper prices and no resonance between macro and fundamentals, LME copper is expected to fluctuate between $12,800-13,500/mt, and SHFE copper between 98,000-104,000 yuan/mt. In the spot market, after entering the trading period for the SHFE copper 2603 contract, the market maintained a large discount, and the pace of inventory reduction was slow. Spot prices against the SHFE front-month contract are expected to range from a discount of 320 yuan/mt to 140 yuan/mt.