SMM

Macro side, last week, the US Fed lowered the federal funds target rate by 25 basis points as expected. Meanwhile, the dot plot indicates only two rate cuts are expected in 2025, suggesting a significantly slower pace of rate cuts in the future, with an overall hawkish tone. Fed Chairman Jerome Powell stated at the press conference that although the current policy rate remains restrictive, the Fed will act more cautiously as it approaches a neutral level. Compared to the Eurozone's accelerated monetary easing under recessionary pressure, the US Fed's 2025 rate curve is gradually flattening. The US dollar index jumped mid-week to 108 points, peaking at 108.52 on Friday, marking a new high for the year. In China, the 2025 economic work priorities have shifted to domestic demand-driven growth, with the annual GDP growth target maintained at 5%. LME copper was pressured by the US dollar last week, dropping to around $8,950/mt, while SHFE copper fell from 74,800 yuan/mt to around 73,500 yuan/mt.

Trade side, the import window remained open last week. Due to the earlier Chinese New Year holiday in 2025, concentrated arrivals in early January saw active transactions. Meanwhile, the new export tax rebate policy for copper semis spurred long-term demand for bonded warehouse warrants, leading to significant transactions of registered deliverable cargoes. Market quotes for registered pyro copper B/L premiums ranged from $55-70/mt, and warehouse warrant premiums performed higher, with actual transaction premiums settling around $50-60/mt. Registered pyro copper warehouse warrant premiums were quoted at $60-75/mt, with actual transactions also settling around $50-60/mt. EQ cargo prices remained firm, with actual transaction premiums at $15-20/mt. Recently, some long-term contracts in the imported copper market in the Shanghai bonded zone have been finalized, and spot order trading activity has steadily increased.

Domestic market side, due to limited short-term arrivals, suppliers stood firm on quotes with higher premiums. However, market transactions showed mediocre performance, and year-end trading activity gradually declined. Copper premiums jumped initially and then pulled back during the week, with long-term contract negotiations providing only partial support. Similarly, as the Chinese New Year holiday is earlier than in previous years, market traders were reluctant to hold too much spot cargo at year-end, making premiums more likely to fall than rise.

Looking ahead to this week, during the Christmas holiday, macro activity in Europe and the US is expected to remain subdued, leaving copper futures lacking clear direction. Under the strong US dollar, copper prices are expected to continue operating at low levels. Spot market side, with the execution of 2024 long-term contracts gradually concluding, year-end corporate activities will focus on payment collection. Under inventory destocking pressure, premiums are more likely to fall than rise.