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Macro side, the US December non-farm payrolls data exceeded expectations, reinforcing inflation resilience. The market lowered the number of US Fed interest rate cuts in 2025 to one and postponed the first rate cut to Q4. The January FOMC meeting statement removed the term "policy lags," implying a high threshold for rate cuts, with the US dollar index remaining supported in the short term. On February 1, Trump signed an executive order imposing a 10% tariff on Chinese goods and a 25% tariff on automobiles from Canada and Mexico. Concerns over limited fiscal expansion pushed the 10-year US Treasury yield higher, pressuring risk assets during the holiday. In Europe, the Eurozone's January CPI rebounded YoY, with core CPI remaining elevated. However, Q4 GDP contracted by 0.2% QoQ, forcing the ECB to cut rates by 25bp to 3.75%. Lagarde stated that "rate cuts are not pre-set," narrowing the market's full-year rate cut expectations to two. The price spread between the COMEX most-traded contract and the LME 0-3M contract widened again to around $600/mt. LME copper surged, quickly breaking above $9,350/mt, while the most-traded SHFE copper contract also rose to around 77,000 yuan/mt during the week.
Fundamentally, copper concentrate supply remains tight, with ongoing imbalances between mines and smelters. Copper concentrate TCs fell back into negative territory, putting pressure on smelter profitability. Market rumors suggest some smelters may delay commissioning, reduce feedstock input, or extend maintenance periods. For copper cathode, rising spot premiums in the North American market attracted some traders to redirect supplies from South America and Africa to North America, with February import arrivals expected to decrease. After the holiday, the SHFE/LME price ratio improved, and market inquiries and offers became active. In domestic trade, social inventories built up by nearly 100,000 mt during the Chinese New Year holiday, with approximately 75,000 mt in east China, aligning with market expectations. After the holiday, the SHFE copper near-month contango structure widened, and suppliers were reluctant to sell at low prices. As end-users resumed operations gradually, downstream inventory digestion remained slow. However, concerns over tight long-term supply provided support for spot premiums.
Looking ahead, the US dollar index is expected to remain supported in the short term by US Treasury yields and geopolitical risk aversion. However, the continued decline in LME copper inventories may support copper prices at high levels. LME copper is expected to fluctuate between $9,300-9,500/mt in the short term, while SHFE copper is projected to trade within the range of 75,500-77,500 yuan/mt. Domestically, the most-traded SHFE copper contract may be underpinned by policy expectations after the holiday, while spot premiums, pressured by inventory buildup, may expand to a discount of 60 yuan/mt to a premium of 20 yuan/mt.
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