US Dollar Index Breaks Through 109, Copper Prices Under Pressure Above【SMM Copper Morning Meeting Summary】

Futures Market: Overnight, LME copper opened at $8,776.5/mt, initially bottoming at $8,766/mt. The center then rose and maintained wide fluctuations, peaking intraday at $8,819/mt before closing at $8,801/mt, up 0.22%. Trading volume reached 18,000 lots, and open interest stood at 258,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 73,130 yuan/mt, initially declining to a low of 72,780 yuan/mt. The center gradually rose during fluctuations, peaking at 73,250 yuan/mt near the close and finally settling at 73,190 yuan/mt, down 0.15%. Trading volume reached 37,000 lots, and open interest stood at 160,000 lots.

【SMM Copper Morning Brief】News: (1) ECB Governing Council member Stournaras expects the ECB's interest rate to decrease to 2% by this autumn.

(2) As of Thursday, January 2, SMM copper inventories in major regions across China increased by 1,200 mt WoW to 114,300 mt, up 8,900 mt compared to last Thursday, marking the second consecutive week of inventory growth.

Spot Market: (1) Shanghai: On January 2, #1 copper cathode spot prices against the front-month 2501 contract were quoted at a premium of 70-120 yuan/mt, with an average premium of 95 yuan/mt, up 115 yuan/mt from the previous trading day. According to the SMM survey, a slight inventory buildup continued in Shanghai this week, mainly due to increased imports. In the short term, premiums rose due to some traders restocking, but downstream consumption has gradually weakened. Premiums are expected to decline slightly today.

(2) Guangdong: On January 2, #1 copper cathode spot prices against the front-month contract were quoted at a premium of 100-150 yuan/mt, with an average premium of 125 yuan/mt, up 20 yuan/mt from the previous trading day. Overall, suppliers refrained from offloading at low prices and stood firm on quotes at the beginning of the year, but downstream restocking was not active, leading to muted overall transactions.

(3) Imported Copper: On January 2, warehouse warrant prices ranged from $59 to $73/mt, QP January, with an average price down $3/mt from the previous trading day. B/L prices ranged from $56 to $70/mt, QP February, with an average price down $3/mt from the previous trading day. EQ copper (CIF B/L) was quoted at $13-27/mt, QP January, with the average price unchanged from the previous trading day. Quotes referenced cargoes arriving in late January and early February. Yesterday, the SHFE/LME price ratio for the SHFE copper 2502 contract was around -129.56 yuan/mt. LME copper 3M-Jan stood at C$49.08/mt, while the 2501-2502 spread was around C$45/mt. With the price ratio improving, the import profit window for early January cargoes opened significantly, leaving the market with almost no offers. Offers for the Chinese New Year period and late January were also scarce, with transaction centers lower than pre-holiday levels. Meanwhile, EQ cargo quotes remained firm.

(4) Secondary Copper: On January 2, secondary copper raw material prices fell by 600 yuan/mt MoM. Guangdong bare bright copper prices ranged from 67,600 to 67,800 yuan/mt, down 600 yuan/mt from the previous trading day. The price difference between primary metal and scrap was 1,347 yuan/mt, up 433 yuan/mt MoM. The price difference between primary and secondary copper rods was 645 yuan/mt. According to the SMM survey, significant price discrepancies existed yesterday between scrapyards and secondary copper rod plants. Scrapyards quoted bare bright copper at 66,800 yuan/mt, while secondary copper rod plants quoted 67,600-67,800 yuan/mt. In Foshan Dali, scrapyards offered bare bright copper at approximately 67,200-67,400 yuan/mt. As policies were newly implemented, the market still needs time to react. In the short term, raw material prices are expected to fluctuate to varying degrees. SMM will continue to monitor price changes across regions.

(5) Inventory: On January 2, LME copper cathode inventories decreased by 50 mt to 271,350 mt. On the same day, SHFE warehouse warrant inventories increased by 1,270 mt to 19,206 mt.

Prices: Macro-wise, the market expects Trump's policies to boost the US dollar, with the US dollar index continuing to hit new highs since November 2022, putting pressure on copper prices. Domestically, during a visit to Shandong, Li Qiang emphasized the need to continue implementing trade-in policies for consumer goods and to accelerate the construction of battery swapping infrastructure this year. Fundamentally, on the first trading day after the New Year holiday, copper prices fell while premiums rose. However, downstream restocking demand was moderate, and overall transactions were only slightly better than pre-holiday levels. As of Thursday, January 2, SMM copper inventories in major regions across China increased by 1,200 mt WoW to 114,300 mt, up 8,900 mt compared to last Thursday, marking the second consecutive week of inventory growth. In summary, with the US dollar index hitting new highs and manufacturing consumption relatively weak, copper prices are expected to face resistance.

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【The above information is based on market data and comprehensive assessments by the SMM research team. The information provided is for reference only and does not constitute direct investment advice. Clients should make prudent decisions and not substitute this information for independent judgment. Any decisions made by clients are unrelated to SMM.】