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Macro side, in January 2024, the US retail sales month-on-month rate recorded -0.9%, marking the largest decline since the beginning of the year, indicating weak consumption. Additionally, the Trump administration further expanded tariff coverage, proposing a 25% tariff on imported cars, pharmaceuticals, chips, and other products. The US Fed continued to monitor inflation and economic conditions. Although inflation is expected to decline, upside risks remain. Meanwhile, the US and Russia held talks in Saudi Arabia, with both sides expressing intentions to restore normal relations and attempting to resolve the Russia-Ukraine conflict. On the European Central Bank side, hawkish voices are gradually rising, and the market expects limited room for future easing policies. The ECB will continue to focus on balancing inflation and economic growth, with future decisions likely to face more complexities. In China, new social financing in January reached 7,056.7 billion yuan, exceeding expectations, reflecting the support of government debt issuance and credit improvement for the economy. The government actively introduced policies to support the development of private enterprises and is expected to maintain a proactive fiscal policy stance. The PBOC also stated that it will implement moderately loose monetary policies to promote economic growth. LME copper, after forming a long upper shadow last Friday, first declined and then rebounded, fluctuating around $9,400-9,550/mt. The most-traded SHFE copper contract fluctuated around 76,500-78,000 yuan/mt during the week.
Fundamentals side, after a brief shock between the LME February date and March date last Friday evening, the price spread between the LME March date and April date turned back to a backwardation structure mid-week. The significant fluctuation in carry costs sharply worsened the SHFE/LME price ratio, and by the end of the week, the import loss against the SHFE copper 2503 contract had expanded to 1,200 yuan/mt. Based on the current common pricing months of M+5 to M+6 for copper concentrates, the profit for bonded warehouse transactions could reach 700 yuan/mt. It is reported that domestic smelters have already planned to increase export volumes. Domestically, after the delivery of the SHFE copper 2502 contract, both suppliers and downstream buyers made large purchases, but the spot market was not active, with spot premiums falling to around a discount of 100 yuan/mt. The inventory buildup pace slowed, but downstream operations still face challenges, and whether end-use consumption can pick up remains the market's focus for March.
Looking ahead, the US Fed may be forced to extend the interest rate cut cycle and raise the target rate under inflationary pressure. The upside room for copper futures in the short term is limited, and the January US core PCE index may provide more guidance for the next interest rate decision. LME copper is expected to fluctuate between $9,450-9,600/mt, while SHFE copper is expected to fluctuate between 76,500-77,500 yuan/mt. Spot side, the domestic inventory buildup trend is slowing, and the short-term arrival volume of imported copper will decrease. With the worsening SHFE/LME price ratio, active import volumes will remain limited. Spot prices against the SHFE copper 2403 contract are expected to range from a discount of 150 yuan/mt to a discount of 50 yuan/mt.
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