- The London Metal Exchange's benchmark three-month copper contract closed up 0.64% at $13,318 per ton, driven by the temporary drop in the dollar index following the US President's announcement of an indefinite extension of the Middle East ceasefire agreement, which reduced marginal procurement costs for holders of non-dollar currencies.
- Kevin Warsh, nominee for Federal Reserve Chairman, clearly refused to commit to an interest rate cut to the White House during the Senate confirmation hearing. This defense of monetary policy independence limited the downward space for the dollar, thus suppressing the upward space for commodity prices.
- The Shanghai Futures Exchange officially opened nickel futures and options trading to overseas investors, driving the main nickel contract up 0.53% to 141,540 yuan per ton, with a significant increase in the activity of funds in the domestic and foreign metal derivatives markets and in convergence trading.
Misaligned Pricing of Exchange Rates and Geopolitical Expectations
On this trading day, the marginal pricing variables of the basic metals market were highly focused on Washington's diplomatic statements and the mechanical transmission of the foreign exchange market. The US President's statement on the indefinite extension of the ceasefire agreement with Iran temporarily eased macroeconomic funds' risk aversion to a full-scale Middle Eastern crisis. The dollar index retreated by 0.12% from the one-week high reached on Tuesday, with this weakening benchmark directly providing the London Metal Exchange copper price with the path of least resistance for upward correction. However, the market's reaction to this diplomatic rhetoric remained very restrained. Since the Strait of Hormuz is still practically blocked, the supply chain friction in the physical spot market has not been substantively resolved, leading to copper prices' rebound momentum being significantly weaker than the theoretical transmission amplitude of exchange rate fluctuations.
The Implicit Suppression of Macro Demand by Solidified Energy Premium
In stark contrast to the moderate rebound in copper prices is the high level of the energy market. Brent crude futures surged 0.93%, with the price center continuing to hover below the sensitive $100 per barrel threshold. As the inflation anchor of global commodities, the solidification of its risk premium is sparking concerns about macroeconomic stagnation. On the one hand, high energy costs have elevated the rigid expenditure of mining and logistics, providing bottom cost support for basic metals; on the other hand, persistently high oil prices are bound to seep into core inflation, thereby eroding the profit margins of global manufacturing and overall demand for end consumer goods. This dual game of cost-push and demand suppression makes copper bulls hesitant when faced with the absolute high price of $13,318.
Monetary Policy Independence Sets the Tone for Liquidity Marginal Expectations
In terms of forward guidance for macro liquidity, the Federal Reserve's policy determination has once again become the core variable suppressing the valuation elasticity of industrial metals. The testimony of Kevin Warsh, nominee for Federal Reserve Chairman, during the Senate hearing demonstrated significant hawkish independence. He explicitly indicated to Congress that he had not compromised with the government on the path of interest rate cuts. This statement quickly corrected the market's previous optimistic speculations about political intervention in monetary policy. If the Federal Reserve maintains the current restrictive interest rate level for an extended period with the support of strong economic data, the dollar's interest rate differential advantage will be difficult to materially weaken. This high-interest environment means that the financial costs of holding physical inventories will remain high for a long time, exerting ongoing valuation reevaluation pressure on non-interest-bearing commodity assets, including copper and aluminum.
Supply-Side Structural Risks and Forward Fundamental Predictions
In the micro-fundamental deduction layer, the calculation models of international investment banks provide reference paths for industrial capital. In its latest report, Goldman Sachs maintained its baseline outlook for copper prices in 2026, expecting an average price of $12,650 per ton for the year and reaffirmed their calculation of a full-year macro supply surplus. However, the institution specifically highlighted a non-traditional risk point in the supply chain: a potential shortage of the by-product sulfuric acid may pose a hard physical constraint on the refining capacity of primary copper. If smelters are forced to cut production due to acid inventory overstock or a shortage of chemical raw materials, this supply-side structural friction could unexpectedly tighten the flow of the spot market over several future quarters, thus hedging part of the downward pressure caused by weak macro demand.
