In April, copper prices continued to rise, filling the gap, with long and short funds increasing positions near the resistance level, and short positions increasing to defend the resistance level. As copper prices rose, the domestic most-traded contract shifted from short to long, maintaining a small long exposure; international financial and industrial capital reduced both long and short positions, slightly shrinking the exposure scale. Market bullish sentiment recovered, and the options market predicted that copper prices in May would operate within the range of 70,000 yuan to 80,000 yuan/mt. Long and short positions increased fiercely, with short positions increasing to defend the resistance level. On the SHFE copper futures market, on April 7, longs accelerated their exit, and copper prices hit the lower limit at 73,640 yuan/mt; in mid-April, shorts took profits and longs increased positions, driving copper prices to rebound sharply, approaching the resistance range of 78,500 yuan to 79,500 yuan/mt; in late April, long and short funds increased positions near the resistance level, with shorts increasing positions to drive down prices. On the LME copper futures market, in April, shorts increased positions, driving prices down to a low of 8,105 $/mt, after which some shorts took profits and exited, driving copper prices to rebound to the resistance level of 9,500 $/mt, with long and short positions showing fierce increases. On April 30, the SHFE copper closing price was 77,220 yuan/mt, down 3.4% from 79,950 yuan/mt in the same period in March; the LME copper closing price was 9,125 $/mt, down 6% from 9,710 $/mt in the same period in March. Domestic most-traded contracts shifted from short to long, while international financial and industrial capital reduced both long and short positions. On April 30, the top 20 futures companies in SHFE copper held a net long position of 5,316 lots, compared to a net short position of 4,496 lots in the same period in April, with domestic most-traded contracts shifting from short to long, and the reduction of short positions by domestic most-traded contracts being an important force driving copper prices higher. On May 2, LME copper commercial institutions (including producers, traders, processors, users, and other industrial clients) held a net short position of 60,001 lots, narrowing the short exposure by 4,895 lots compared to the same period in April, while investment funds held a net long exposure of 31,505 lots, narrowing the long exposure by 10,072 lots compared to the same period last month. Market speculation risk is at a medium level. On April 30, the open interest of the most-traded SHFE copper contract was 169,000 lots, and the copper inventory in SHFE designated delivery warehouses was 89,000 mt, with the ratio of open interest to delivery warehouse inventory at 9.4, at a medium-high level; the open interest of LME 3-month copper was 287,000 lots, with inventory at 200,000 mt, and the average monthly deliverable production at 1.41 million mt, with the ratio of open interest to the sum of exchange inventory and production in the next three months at 1.6. Considering comprehensively, LME copper open interest is at a low level, inventory is relatively abundant, and market speculation risk is at a medium level. Copper prices are at a medium-high position within the long-term price range. The long-term operating range of SHFE copper futures prices is 41,000 yuan to 89,000 yuan/mt, and the long-term operating range of LME copper futures prices is 5,100 $ to 11,100 $/mt. On April 30, the closing price of the most-traded SHFE copper contract was 77,220 yuan/mt, positioned at the 75th percentile of its long-term price range. The closing price of LME copper futures was $9,125/mt, positioned at the 67th percentile of its long-term price range. Copper prices continued to rise, filling the gap. In mid-April, copper prices rebounded sharply and continued to climb, with SHFE copper prices reaching the upper end of the 71,000-79,500 yuan/mt range, essentially filling the previous gap. In the short term, there was intense competition between bullish and bearish capital, causing copper prices to fluctuate rangebound within the 76,500-78,500 yuan/mt range. LME copper prices fell rapidly, breaking below the lower end of the 8,700-dollar/mt oscillation range. After finding support near $8,100/mt, prices rebounded strongly, returning to around $9,500/mt. LME copper backwardation persisted between far-month and near-month contracts. Recently, spot resources have gradually tightened from a previously loose state. On April 30, the most-traded SHFE copper far-month contract was trading at a backwardation of 2.6% compared to the near-month contract. The LME copper far-month contract was trading at a premium of $6.8/mt over the near-month contract, indicating parity. The LME copper Cash/3M spread was at a premium of $55.16/mt, up $50.11/mt from the same period in March, reflecting a gradual tightening of spot resources in the near term. Market bullish sentiment has recovered somewhat. The options market expects copper prices to mainly operate within the 70,000-80,000 yuan/mt range in May. After a sharp rise to historical highs in April, the implied volatility of SHFE copper options quickly pulled back, maintaining a level slightly above the midpoint of the past six months. On April 28, the implied volatility of SHFE copper options closed at 23.33%, with the market expecting a high probability of copper prices remaining rangebound. From the perspective of the strike price with the highest open interest in SHFE copper options, on April 28, the strike price with the highest open interest for Cu2506 put options fell sharply to 70,000 yuan/mt, with an option premium of 276 yuan/mt. The strike price with the highest open interest for call options was 80,000 yuan/mt, with an option premium of 628 yuan/mt. The market expects copper prices to mainly operate within the 70,000-80,000 yuan/mt range in May. In terms of options open interest, on April 28, put open interest was 36,975 lots, a decrease of 4,117 lots from the same period in March. Call open interest was 31,230 lots, a decrease of 9,754 lots from the same period in March. The Put-Call Ratio (PCR) of open interest closed at 1.18, an increase of 0.18 from the same period in March, reflecting an increase in bullish sentiment in the SHFE copper market. (Author's Affiliation: China Metal Mining Economics Institute)

On April 22, at the CCIE-2025SMM (20th) Copper Industry Conference and Copper Industry Expo - Copper Industry Innovation Forum, co-hosted by SMM Information & Technology Co., Ltd., SMM Metal Trading Center, and Shandong Aisi Information Technology Co., Ltd., with Jiangxi Copper Corporation and Yingtan Land Port Holding Co., Ltd. as the main sponsors, Shandong Humon Smelting Co., Ltd. as the special co-sponsor, and Xinhuang Group and Zhongtiaoshan Nonferrous Metals Group Co., Ltd. as co-sponsors , , Weng Zhantu, head of the Marketing and Product Department of the Derivatives Division of Jinrui Futures Co., Ltd., shared insights on how over-the-counter derivatives can promote high-quality development in the copper industry. Overview of Over-the-Counter Derivatives Business Growth in Notional Principal of Over-the-Counter Derivatives Business of Risk Management Subsidiaries Over-the-Counter Derivatives Business in the Nonferrous Metals Sector (Market Share) (Data Source: China Futures Market Monitoring Center) Development of Copper On-Exchange Futures and Options In 2024, the daily average open interest of SHFE copper futures was 389,900 lots, with a cumulative trading volume of 50.8647 million lots; the daily average open interest of SHFE copper options was 58,000 lots, with a cumulative trading volume of 23.2471 million lots. Enhancing Industry Risk Management Capabilities Enhancing Industry Risk Management Capabilities - Buy Insurance Strategy (Buying Options) • Enterprise Demand: On March 29, 2024, after a copper processing enterprise priced its raw material procurement, downstream customers did not fix the price due to rising prices, resulting in an unhedged exposure of 1,000 mt. According to the company's policy, strict hedging was required, but the enterprise believed that the market was likely to continue rising. They sought a better way to comply with the strict hedging policy while still benefiting from the rise in copper prices. • Traditional Operation: Hedging with a short futures position on the 05 contract at 72,500, requiring an initial futures margin of 6.525 million yuan. • Hedging Optimization: Purchasing 1,000 mt of at-the-money put options on CU2405 from Jinrui Capital, with an entry price of 72,500, a strike price of 72,500, and an expiration date of April 30, paying a total premium of 1.015 million yuan. • Option Strategy - Buy Insurance (Buying Options) On March 29, 2024: The enterprise purchased 1,000 mt of at-the-money put options on CU2405 from Jinrui Capital, with an entry price of 72,500, a strike price of 72,500, and an expiration date of April 30. The initial premium paid was 1,015 yuan/mt, with a premium rate of approximately 1.40%, totaling 1.015 million yuan initially. April 30, 2024: The closing price of CU2405 was 82,340 yuan/mt, with the options not exercised. The loss at expiration was equal to the initial premium of 1,015 yuan/mt. In a sharply rising market, buying put options for short hedging means that, on one hand, after paying an initial 1.015 million yuan, there is no need for additional margin calls; on the other hand, the inventory at expiration is sold at 82,340 yuan/mt. Combining futures and spot, the enterprise's earnings increase by 8,825 yuan/mt, totaling 8.825 million yuan, effectively capturing the benefits of rising spot prices. • Advantages of buying OTC options: Compared with futures hedging, it can avoid margin calls in a volatile market and effectively capture the benefits of rising spot prices. Compared with exchange-traded options, it allows for flexible selection of strike prices and expiration dates. Enhancing Industrial Risk Management Capabilities - Income-Enhancing Strategies (Selling Options) • Enterprise Needs: On November 26, 2024, copper prices were quoted at around 74,300 yuan. A wire and cable enterprise, based on its business plan and market expectations, planned to establish a raw material inventory reserve. It intended to purchase 1,000 mt at a copper price of around 73,000 yuan and 2,000 mt at around 72,000 yuan through fixed-price procurement. • Traditional Operations: The enterprise placed daily orders for 1,000 mt of long positions in 73,000 futures on the futures market, waiting for execution. ► Option Strategy - Income Enhancement (Selling Options) November 26, 2024: The cable enterprise chose to sell 1,000 mt of out-of-the-money put options with CU2501 as the underlying asset, with an entry price of 74,000, a strike price of 73,000, an expiration date of December 25, a premium of 600 yuan/mt, and a margin of 4,012 yuan/mt, totaling an initial 4.012 million yuan. December 25, 2024: The closing price of CU2501 was 74,140 yuan/mt, with the options not exercised. The enterprise received a premium of 600 yuan/mt at expiration, totaling 600,000 yuan. Upon the expiration of the options, as CU2501 never fell below 73,000 during the period, the enterprise did not purchase additional inventory but still achieved an income increase of 600,000 yuan through selling the options. • Summary of Scenarios for Selling Options: The enterprise has a clear strategic inventory purchase price (or strategic hedging selling price); within the scope of risk appetite, as long as the market logic remains unchanged, continuous rolling operations can be conducted. ► Summary of Characteristics of OTC Options and Exchange-Traded Options: Enhancing Industrial Risk Management Capabilities - Accumulation Structures It lists relevant cases and summarizes the advantages of knock-out enhanced accumulation options: the opportunity to obtain a better position-building price than the entry price; if the price is volatile enough to trigger a knock-out and terminate the option, although the enterprise can no longer continue to acquire long positions at a lower price, it will receive a one-time position for the remaining tonnage at the entry price, which is at least the same as the cost of direct futures position-building and meets the initial hedging quantity. International Development of the Service Industry International Development of the Service Industry - Exporter's Overseas Market Hedging Strategy It lists and summarizes relevant cases of the international development of the service industry - exporter's overseas market hedging strategy. Overseas Commodity Return Swaps: Products linked to commodity futures in overseas markets are traded and settled in RMB domestically. Business Advantages: More convenient settlement in RMB, improving transaction efficiency; Trading Varieties: LME metals, COMEX copper and precious metals, SGX iron ore, ICE cotton, and energy products, etc.; Note: Specific varieties, transaction limits, etc., are subject to actual inquiries. In addition, it also lists and summarizes relevant cases of the international development of the service industry - importer's price ratio locking strategy. Discussion on Optimizing Industrial Financing Models The integration of warrant service business and OTC derivatives business of risk management subsidiaries can provide industrial clients with richer spot financing models. For example: To meet the financing needs of industrial clients for spot purchases, risk management subsidiaries can provide zero-interest warrant service business. 》Click to view the special report on the 20th CCIE-2025SMM Copper Industry Conference & Copper Industry Expo