In the morning session, the SHFE copper 2506 contract briefly dipped to 78,660 yuan/mt before rising to 78,860 yuan/mt, and then continued to pull back. The price spread between futures contracts (BACK) for the next month continued to fluctuate around 100 yuan/mt, showing no signs of a rally for the time being. The import loss for the current month's SHFE copper narrowed to around 1,150 yuan/mt compared to previous days. Major smelters have largely locked in their export volumes, shipping supplies to bonded zones and LME Asian warehouses.

In the morning session, the SHFE copper 2506 contract briefly dipped to 78,660 yuan/mt before rising to 78,860 yuan/mt, and then continued to pull back. The price spread between futures contracts for the next month (BACK) continued to fluctuate around 100 yuan/mt, showing no signs of a rally for the time being. The import loss for the current month's SHFE copper narrowed to around 1,150 yuan/mt compared to a few days ago. Major smelters have largely locked in their export volumes, shipping their supplies to bonded zones and LME Asian warehouses.

In terms of consumption, there is still a lag in the transmission of terminal orders to the upstream sector. Orders for primary processed materials are average. Given the weak demand, it is difficult for spot premiums to improve, and the near-month structure is expected to widen significantly.

[SMM Analysis] It cannot be ignored that the shortage of copper concentrates has gradually been transmitted to copper cathode. In the first half of 2024, there were continuous reports of production cuts and even shutdowns at overseas smelters. This indicates that despite the launch of new smelting and refining projects in the second half of the year (H2), the global supply of copper cathode will not ease.

[SMM Analysis] In May, Shanghai spot copper premiums jumped initially and then pulled back, rapidly retreating after briefly touching premiums above 400 yuan/mt. Before the contract rollover of SHFE copper 2505, due to the mismatch between high open interest and low warrants for the current month, the backwardation structure of the near-month contracts continued to rise to above 500 yuan/mt. After the contract rollover, the price spread between futures contracts naturally shifted to premiums against the SHFE copper 2506 contract, hence presenting a brief period of high premiums. As copper prices remained high after the contract rollover, downstream purchasing sentiment weakened. Coupled with arbitrageurs closing out their profitable positions from the previous structure, spot traders actively sold off their inventory, causing spot premiums to decline.

》Check SMM metal quotes, data, and market analysis 》Subscribe to view historical price trends of SMM metal spot cargo This week, spot premiums first declined and then rose, mainly due to the continuous arrival of imported copper. However, as the Dragon Boat Festival holiday approached, downstream players still had stockpiling sentiment, with cargo pick-up improving mid-week and inventories declining during the week. Looking ahead after the holiday, as LME Asian inventories continue to flow into China, it is expected that there will be continuous arrivals during the Dragon Boat Festival, providing downstream buyers with more purchasing options and further driving down prices. Currently, copper prices are stabilizing around 78,000 yuan/mt, with no significant improvement in downstream orders or operations. Therefore, it is expected that the east China market will face pressure from oversupply next week. 》Check SMM metal industry chain database

SMM News on May 29: As of Thursday, May 29, SMM's copper inventories in major regions across China decreased by 1,000 mt WoW from Monday to 138,700 mt, continuing to show destocking. Major consuming regions, including Shanghai, Guangdong, and Jiangsu, all experienced destocking, with Shanghai seeing the largest reduction of 1,100 mt. Specifically, there was still a continuous supply of imported copper in Shanghai this week, mostly from LME Asian regions where cargoes were previously canceled and then shipped to China. Copper prices stabilized this week, and spot premiums for SHFE copper fell. Although the sentiment for stockpiling ahead of the Dragon Boat Festival among downstream consumers was not strong, normal cargo pick-up continued, leading to a slight decrease in inventories in Shanghai. Inventories in Guangdong and Jiangsu only decreased slightly, with outflows from warehouses improving WoW. Looking ahead to next week, imports are expected to continue arriving in the near term. During the Dragon Boat Festival holiday, a slight inventory buildup is anticipated in major consuming regions, with Jiangsu mainly supplied by smelters. 》Click to apply for access to the SMM Metal Industry Chain Database

》Check SMM metal quotes, data, and market analysis 》Subscribe to view historical price trends of SMM metal spot prices This week (May 19-23), the weekly average price range for Yangshan copper premiums B/L transactions was $1,000 to $117.2/mt, with QP June, and the average price was $108.6/mt, down $6.4/mt WoW. Warrant prices ranged from $89.2 to $97.6/mt, with an average price of $93.4/mt, down $6/mt WoW, QP June. EQ copper CIF B/L prices ranged from $72/mt to $82.8/mt, with an average price of $77.4/mt, down $2.6/mt WoW, QP June. As of May 16, the SHFE/LME copper price ratio for the LME copper vs. SHFE copper 2506 contract was 8.1814, with import profit/loss around -700 yuan/mt. As of Friday, LME 3M-Jun copper was in backwardation of $35.15/mt; the spread between June date and July date swap fees was BACK $7.1/mt. Currently, the actual price for high-quality ER copper warrants is $96/mt, mainstream pyrometallurgical copper is $92/mt, and SX-EW copper is $88/mt. High-quality copper B/L prices are $114/mt, mainstream pyrometallurgical copper is around $104/mt, and SX-EW copper is $94/mt. CIF B/L prices for EQ copper range from $70/mt to $80/mt, with an average price of $75/mt. At the LME Asian Metals Seminar in Hong Kong this week, the US dollar copper market was relatively sluggish. However, a small number of inquiries, offers, and transaction information still guided spot premiums downward. As LME cancelled warrants are expected to flow out by 50,000-70,000 mt, with an estimated 70% destined for China and 30% for Southeast Asia, suppliers hold a bearish outlook for short-term premiums. However, except for domestic warrant B/Ls, premiums for EQ copper and other registered brands remain relatively firm. Due to the weak performance of the SHFE/LME price ratio, downstream enterprises have poor purchase willingness. Looking ahead, with premiums in Southeast Asia remaining high, a deterioration in the price ratio may attract some domestic smelters to expand their export volumes in June. The balance in the Asian region remains tight before the implementation of the S232 investigation. It is expected that Yangshan copper premiums will continue to decline next week but will rebound after the announcement of June long-term contracts. According to the SMM survey, as of Thursday (May 22), copper inventories in domestic bonded zones decreased by 8,100 mt from the previous period (May 15) to 60,700 mt. Specifically, bonded copper inventories in Shanghai decreased by 4,800 mt to 53,700 mt, while those in Guangdong decreased by 3,300 mt to 60,700 mt. The main reason for the continuous decline in bonded zone inventories this week is still the inflow of bonded zone inventories attracted by the delivery of the SHFE copper 2505 contract. Looking ahead, with the current weak performance of the import price ratio and the concentrated arrival of imported copper in late May, it is expected that the decline in bonded zone inventories will slow down. 》View SMM Metal Industry Chain Database

On the macro front, the auction results for 20-year US Treasury bonds were poor on Wednesday, and the 10-year US Treasury yield rose by over 11 basis points (BP) on Thursday. The market remains cautious about potential quantitative easing (QE) operations by the US Fed, with the US dollar index briefly returning above 100 before slipping again. In China, the marginal value-added of industrial production in April pulled back, while retail consumption increased slightly. Overall growth remained steady. On Wednesday, the People's Bank of China (PBOC) cut the 1-year and 5-year loan prime rates (LPR) by 0.1%, continuing to release domestic liquidity. This week, LME copper fluctuated rangebound near $9,500/mt, while SHFE copper also fluctuated rangebound below 78,000 yuan/mt. On the fundamental front, Antofagasta initiated negotiations for long-term contracts for the second half of 2025 in Japan this week. Due to news of production cuts from overseas smelters, spot treatment charges (TC) for copper concentrates have stabilized in the short term. For copper cathode, with the LME Asia Metal Week held in Hong Kong, China this week, the spot market was sluggish. Outflows from LME Asia warehouses accelerated, and the market held a relatively pessimistic sentiment towards the premium of US dollar-denominated spot copper in late May. Domestically, after the delivery of the SHFE copper 2405 contract, spot premiums continued to decline, falling to around 100 yuan/mt in east China this week. Downstream restocking sentiment increased as prices dipped, with inventory stabilizing after pulling back. Looking ahead to next week, with the release of liquidity both domestically and internationally, copper prices are expected to have strong support at the bottom. Before the conclusion of mid-year long-term contract negotiations, copper prices are likely to remain in a tug-of-war between sellers and buyers. It is expected that LME copper will fluctuate rangebound between $9,350-9,550/mt, while SHFE copper will fluctuate between 77,000-78,000 yuan/mt. On the spot front, with the temporary slowdown in domestic inventory buildup and strong downstream consumption support after a sharp decline in premiums, amid tight deliverable copper supplies, attention should be paid to the arrival of imported copper at customs and the tug-of-war between supply and demand for stockpiling ahead of the Dragon Boat Festival. Spot prices against the SHFE copper 2506 contract are expected to range from a premium of 100-250 yuan/mt.

According to SMM, the head of metals and mining research at Mercuria Energy Trading Group said that the company expects a shortage of 700,000 mt of copper concentrates and 300,000 mt of copper cathode this year, which could drive copper prices to record highs. Nicholas Snowdon, a well-known copper bull at Mercuria, said that he expects copper prices to reach new highs sooner or later. Speaking at the LME Asia Week conference in Hong Kong, Snowdon said, "The copper market is currently in an extremely fragile state. For us, the question is not whether there will be a shortage, but when. This situation is likely to occur in the second half of the year.