Rate Hike Expectations Cooling and Destocking Continues, Copper Prices Maintain Fluctuating Trend [SMM Macro Weekly Review]

On the macro front, this week market trading logic continued to revolve around expectations for US Fed policy and developments in the Middle East. At the start of the week, the US Supreme Court ruled that Fed Governor Cook could not be removed for now, sparking discussions about the Fed's independence; meanwhile, the US and Iran continued to wrangle over passage through the Strait of Hormuz and the nuclear issue, causing repeated shifts in market sentiment. Subsequently, US June ADP employment figures missed expectations, and nonfarm payrolls additions also came in markedly below market expectations, alongside sharp downward revisions to previous data, indicating marginal cooling in the US labor market and easing expectations for US Fed interest rate hikes. On the Middle East front, both sides confirmed that the next round of talks will take place on July 18, with the market still holding expectations for further de-escalation in the region. Overall, this week's macro sentiment was jointly driven by fluctuating expectations for US Fed rate hikes and easing Middle East tensions, and copper prices overall continued to consolidate at highs.

On the fundamental side, the supply side remained largely tight this week. Arrivals of both imported and domestic cargo were relatively limited, low-priced available cargoes stayed scarce, cargoes with invoices dated this month remained tight, and suppliers showed strong willingness to hold prices firm. On the demand side, high copper prices continued to suppress downstream purchasing appetite, with the market largely staying on the sidelines and only restocking on a need-to basis for most of the week. Towards the end of the week, as copper prices stabilized, demand recovered slightly. On the inventory front, as of Thursday July 2, SMM copper inventories across major Chinese regions fell by 6,100 mt from last Thursday to 199,900 mt, marking continuous destocking and providing some support to copper prices.

Looking ahead to next week, on the macro front, the market will continue to monitor the Fed's policy path, US economic data, and geopolitical developments ahead of the July 18 US-Iran talks. If US economic data continue to weaken and expectations for rate hikes cool further, this will provide support for copper prices. If Middle East tensions escalate again, however, risk premiums may still emerge. From a fundamental perspective, spot supply remains tight for now, and inventory drawdowns continue, lending some support to prices. However, high copper prices are still curbing end-user purchasing appetite, so the extent of demand improvement is expected to be limited. Copper prices are expected to continue to move sideways within a high range next week, with key focus on inventory changes and the impact of import arrivals on the spot market.