The base metals sector is undergoing a collective adjustment, with Shanghai copper futures experiencing an intraday decline exceeding 3%. Overnight, a rebound in the US dollar index put pressure on international commodity prices. US economic data presented a mixed picture, featuring strong Services PMI figures alongside weak ADP employment data. Furthermore, the release of Non-Farm Payrolls and CPI data has been delayed due to a partial government shutdown. This data divergence and delayed publication are fueling market speculation regarding the timing of potential interest rate cuts. Additionally, LME inventories have shown an increase, pushing the total inventory across the three major global exchanges (LME + COMEX + SHFE) above 860,000 metric tons. This inventory build reflects sluggish demand recovery. Coupled with the approaching Chinese Spring Festival and the anticipated demand vacuum following the holiday, these factors are likely to suppress price trends. In the short term, attention should be paid to the price correlation between base metals and precious metals.
US macroeconomic data showed divergence. The ISM Services PMI for January registered at 53.8, unchanged from December and matching the highest level seen since October 2024, surpassing market expectations, although the new orders sub-index showed some moderation. US ADP employment for January added only 22,000 jobs, significantly lower than the market forecast of 45,000, indicating potential weakening momentum in the labor market. Separately, the US Bureau of Labor Statistics announced that the release of the January Non-Farm Payrolls report is scheduled for February 11, and the January CPI report will be released on February 13. The JOLTS report for December is still set for release on February 5. Market adjustments to interest rate cut expectations warrant close monitoring. On the inventory front, LME inventories increased by 2,525 tons to 178,650 tons; COMEX inventories rose by 1,716 tons to 529,968 tons; SHFE copper warehouse receipts increased by 751 tons to 159,772 tons, while BC copper inventories held steady at 10,615 tons.
The copper market currently continues to face challenges from weak spot market fundamentals, persistently accumulating inventories, and the expected demand vacuum surrounding the Spring Festival holiday. Price fluctuations are likely to persist around the holiday period, advising caution against chasing rallies. However, rigid constraints on the mining supply side and the certainty of long-term demand mean that any significant price declines are likely to attract buying from long-term allocation funds and industrial consumers. This also suggests that any adjustments around the Spring Festival could lay a more solid foundation for medium- to long-term upward movement in copper prices.
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