SMM July 21 – Overnight, LME copper opened at $13,604/mt, swung wildly at the start and touched a low of $13,590/mt, then continued wild swings and near the close climbed to $13,645/mt, finally settling at $13,644.5/mt, up 0.86%. Trading volume reached 15,600 lots, and open interest stood at 244,000 lots, down 1,039 lots from the previous trading day, indicating short position reduction. Overnight, the most-traded SHFE copper 2609 contract opened at 104,490 yuan/mt, dipped to 104,240 yuan/mt shortly after opening, then drifted higher to touch a high of 104,680 yuan/mt, and later moved sideways. It eventually closed at 104,480 yuan/mt, up 0.69%. Trading volume reached 33,800 lots, and open interest stood at 192,000 lots, up 1,706 lots from the previous trading day, indicating long position addition. On the macro front, Iran said mediators proposed a 10-day US-Iran ceasefire to resume implementation of the memorandum of understanding, and it has received the proposal and indicated it may negotiate with the US based on national interests. The Houthis announced a maritime ban against Saudi Arabia, and Saudi Arabia said it is taking military action to ensure shipping safety in the Bab el-Mandeb Strait. US media reported that Trump is focused on making Iran "pay a price," but negotiations between the two countries continue. On the fundamentals side, supply side, available spot resources in China remained acutely tight, social inventory stayed at a low for the year, arrivals from cross-regional transfers were limited, and the tight spot situation is unlikely to ease in the short term. Demand side, the industry was in the traditional consumption off-season, downstream enterprises made sporadic need-to-basis purchases, and overall consumption was weak. Inventory side, as of Monday July 20, SMM copper inventories in major Chinese regions fell by 32,700 mt WoW to 107,300 mt. Continued destocking provided bottom support for copper prices. Overall, the tight supply and destocking trend continued, and copper prices are expected to drift higher today.

[SMM Shanghai spot copper] Social inventory of copper cathode in Shanghai kept declining, and available spot cargoes tightened, which pushed the center of spot premiums steadily higher and hit a new high for the year. Meanwhile, the spot price spread between Shanghai and Guangdong widened further, opening the window for cross-regional transfers. According to SMM, some suppliers have already initiated cargo transfers from Guangdong to Shanghai, and the shipped copper cathode is expected to arrive in the Shanghai market this week.

SMM April 30 update: Guangdong region: Premiums in this region trended higher with fluctuations this week, mainly due to fluctuating inventory declines combined with suppliers insisting on high-premium shipments. As of Thursday, high-quality copper was quoted at 320 yuan/mt, up 30 yuan/mt WoW; standard-quality copper was quoted at a premium of 240 yuan/mt, up 30 yuan/mt WoW; SX-EW copper was quoted at 180 yuan/mt, up 30 yuan/mt WoW. On Thursday, the price spread of standard-quality copper premiums between Shanghai and Guangdong showed Guangdong higher by 210 yuan/mt. Given the large price spread, cross-regional transfers occurred this week, with some northern sources moving south early in the week, though the total volume was not large. According to SMM statistics, as of Thursday, total inventory in Guangdong warehouses was 13,700 mt, down 1,300 mt WoW, with the decline showing a slowdown. Warrants totaled 5,200 mt, down 302 mt WoW. Specifically: warehouse arrivals this week were 12,100 mt/week, up 4,600 mt/week WoW, well below the annual average (14,000 mt/week), mainly due to increased northern sources. Warehouse withdrawals were 13,400 mt/week, down 2,400 mt/week WoW, slightly below the annual average (14,200 mt/week), as many copper processing enterprises planned 3-4 days off during the Labour Day holiday, leading to reduced pre-holiday restocking. Looking ahead to next week, as downstream factories will be on extended holidays during Labour Day, suppliers are expected to prioritize sending cargo to warehouses. Warehouse inventory is expected to increase after the holiday, and spot premiums are unlikely to rise. (The above information is derived from market research and comprehensive assessment by the SMM research team. The information provided in this article is for reference only. This article does not constitute direct investment research advice. Clients should make prudent decisions and not replace independent judgment with this information. Any decisions made by clients are unrelated to SMM.)

[Stagflation Expectations Heat Up Combined with China Inventory Buildup, Divergence Between SHFE and LME Aluminum Continues] Overall, geopolitical risks outside China persisted and supply tightened, keeping LME aluminum prices on a relatively strong footing; high inventory levels in China combined with weak demand limited SHFE upside room, with a clear divergence between SHFE and LME price trends.

As of April 24, the mainstream price in the south China market — SMM A00 aluminum (Foshan) was at a discount of 345 yuan/mt against the 2605 contract, while the mainstream price in the east China market — SMM A00 aluminum was at a discount of 130 yuan/mt against the 2605 contract. The price spread between the two regions had exceeded 200 yuan/mt, covering sea freight, short-haul transfer, and logistics costs, officially opening up the transshipment window between Guangdong and Shanghai...

[SMM Shanghai Spot Copper] Looking ahead to tomorrow, from the perspective of regional price spreads, the intraday Shanghai-Guangdong price spread widened further compared to yesterday, reaching 200 yuan/mt, with the theoretical arbitrage window now open. According to SMM, some suppliers have already begun relocating cargo from Shanghai warehouses to the Guangdong region to capture regional price spread gains. If spot premiums in Guangdong continue to remain strong, cross-regional cargo transfers will effectively divert available cargo from the Shanghai market, potentially providing marginal support for local spot discounts or even boosting spot premiums in Shanghai and other regions. Demand side, after consecutive declines in copper prices, downstream procurement sentiment recovered slightly, but overall purchasing remained dominated by rigid demand. Overall, under the combined effects of cross-regional arbitrage diversion and support from the inter-month price spread structure, Shanghai spot copper is expected to maintain a discount against the 2605 contract tomorrow. Going forward, attention should be paid to the transmission effect of Guangdong premiums on the east China market.