SMM Morning Briefing: Overnight LME copper opened at $13,754.5/mt, dipped to a low of $13,740/mt in early trading, then its center rose to a high of $13,836/mt, subsequently moved sideways and eventually closed at $13,978.5/mt, up 1.3%. Trading volume reached 18,000 lots, and open interest stood at 246,000 lots, a decrease of 342 lots from the previous trading day, reflecting a reduction in bearish positions. Overnight the most-traded SHFE copper 2609 contract opened at 105,370 yuan/mt, dipped to a low of 105,250 yuan/mt early in the session, then its center rose to a high of 105,750 yuan/mt, eventually moved sideways to close at 105,560 yuan/mt, up 0.75%. Trading volume reached 40,000 lots, and open interest stood at 197,000 lots, an increase of 1,132 lots from the previous trading day, reflecting an increase in bullish positions.

This week, the center of Shanghai spot copper premiums consolidated and pulled back. At the start of the week, imported cargoes arrived successively at ports, marginally easing the previous tightness in available supplies. Meanwhile, as month-end approached, the price spread between cargoes with invoices dated this month and next month widened, with some demand to cover this-month invoices providing some support to prices. Mid-week, the pullback in SHFE copper prices led to a slight improvement in downstream bargain-hunting inquiries, and together with month-end invoice demand, spot premiums briefly stabilized. Subsequently, copper prices held up well again, downstream purchasing sentiment cooled, and terminal purchase willingness was mostly concentrated at spot premiums below 200 yuan/mt, with a notable psychological price gap between buyers and sellers. In terms of inventory, SMM data showed that social inventory in Shanghai was 69,500 mt, down 500 mt from this Monday; inventory in Jiangsu was 21,200 mt, down 500 mt from this Monday. Inventory in east China destocked slightly, still providing some support to premiums. Looking ahead to next week, with the start of a new procurement cycle, the sluggish trading at month-end may improve. Some downstream enterprises have phased restocking needs, and spot procurement volumes may rebound marginally. However, SMM understands that the current psychological price level for terminals is mainly concentrated at SHFE copper 104,500–104,800 yuan/mt. If the futures market stays high, the actual release of procurement volumes will still be limited. On the supply side, earlier imported cargoes have already arrived at ports, and the subsequent arrival growth remains to be seen. Meanwhile, absolute inventory in east China remains low, and combined with the backwardation structure for the next-month contract, this provides support to spot premiums. Overall, it is expected that next week, spot copper prices against the SHFE copper 2608 contract will remain at a premium, and the center of premiums may stop falling and stabilize. If copper prices pull back to around downstream psychological levels, improved spot transactions could push premiums slightly higher.

[SMM Shanghai Spot Copper] Tomorrow, with month-end approaching, downstream enterprises are expected to still primarily purchase based on rigid demand. The slight intraday uptick in SHFE copper prices today dampened market purchasing sentiment, and spot trading activity tomorrow is likely to decline compared with the previous trading day. According to SMM, current downstream purchase willingness is largely concentrated at premiums below 200 yuan/mt, with a significant psychological price gap between buyers and sellers. Suppliers may continue to lower offers to facilitate deals. Low-priced non-registered copper, due to its wide price spread with registered copper, has seen relatively decent transactions for some cargoes, but its boosting effect on overall demand is limited. As for inventory, SMM recorded social inventory in Shanghai at 69,500 mt, down 500 mt WoW from Monday; social inventory in Jiangsu at 21,200 mt, down 500 mt WoW from Monday. East China inventory saw slight destocking, still providing some support for spot premiums. However, the current decline in inventory is relatively limited, and offers for cargoes with invoices dated next month are relatively ample. Overall, against the backdrop of low inventory providing support, but weakening month-end consumption and strong downstream desire to bargain down prices, spot Shanghai copper prices against the SHFE copper 2608 contract are expected to maintain a premium tomorrow, but the overall center may continue to shift slightly lower.

[SMM Shanghai Spot Copper] Looking ahead to tomorrow, SHFE copper prices pulled back during the day, triggering a slight release of dip-buying inquiries and purchases from some downstream consumers. Buying sentiment in the Shanghai region improved from the previous trading day. However, according to SMM, current end-user orders are still mostly concentrated around 104,500 yuan/mt, and transaction prices for spot cargoes remain some distance away from downstream psychological price levels, leaving actual demand growth relatively limited. With month-end approaching, some buyers still need to restock cargoes with invoices dated this month. Supply of such cargoes is relatively tight, providing some support for their quotes. In comparison, the market for cargoes with invoices dated next month is more abundant, and suppliers show a strong willingness to sell. The price spread between current-month and next-month invoice cargoes is expected to persist. Overall, against the backdrop of copper price pullback driving dip-buying, demand for current-month invoice cargoes providing support, but only limited improvement in end-use consumption, Shanghai spot copper prices against the 2608 contract are expected to remain at a premium tomorrow, with the overall center likely to move sideways around the current level.

SMM Morning Meeting Summary: Last Friday night, LME copper opened at $13,638.5/mt, consolidated at lows initially before its center moved higher, then touched a high of $13,681.5/mt. Afterwards, the copper price center fluctuated lower, dipping to $13,605.5/mt near the session’s end, and finally settled at $13,611.5/mt, up 0.34%. Trading volume was 12,600 lots, open interest was 248,000 lots, an increase of 728 lots from the previous trading day, driven by bullish position-building. Last Friday night, the most-traded SHFE copper 2609 contract opened at 104,600 yuan/mt, dipped to 104,540 yuan/mt right at the start, then its center rose to touch a high of 104,310 yuan/mt, before moving lower to finally settle at 104,630 yuan/mt, down 0.1%. Trading volume was 25,000 lots, open interest was 207,000 lots, a decrease of 3,481 lots from the previous trading day, reflecting bullish position reduction.

[SMM Shanghai Spot Copper] Looking ahead to next week, the current tight supply of available spot cargoes remains unchanged. After low-priced sources were quickly absorbed intraday, suppliers' willingness to hold prices firm re-emerged, with the premium rebounding to around 300 yuan/mt, indicating strong support from below. According to SMM, after a slight correction in SHFE copper prices, end-use demand emerged, and orders for some copper processing enterprises increased, with end-users mostly placing orders around 104,500 yuan/mt. In terms of supply, some LME cancelled warrants have already been shipped to China and are expected to arrive gradually around next week; the actual supply remains to be observed. Overall, with low inventory, support from the backwardation structure, and downstream dip-buying, Shanghai spot copper prices against the SHFE 2608 contract are expected to maintain a premium next week, though the overall center may edge down slightly. Attention should be paid to the actual impact of import arrival pace on spot circulation.

This week (7.17-7.23), the SMM weekly operating rate for brass billet enterprises was 49.13%, pulling back slightly by 0.48 percentage points WoW, as industry production remained under pressure. The tight supply of recycled brass raw materials failed to ease, raw material procurement prices stayed high, and sample enterprises' days of raw material inventories stood at 3.69 days, remaining at a low level. This week's brass billet production similarly edged down. This week, SHFE copper prices exhibited a consolidation pattern at highs, with the market giving back earlier gains towards the end of the week. Intensified price fluctuations further disrupted market trading pace. The traditional off-season characteristics of downstream industries continued to deepen. Order volumes in key end-user sectors such as refrigeration, sanitary ware, and hardware sustained their downward trend, and the market lacked effective demand growth. Downstream buyers remained cautious, mostly maintaining a pattern of sporadic, need-based procurement. The destocking pace of brass billet finished products was hindered, and sample enterprises' days of finished product inventories stood at 5.09 days. Looking ahead to next week (7.24-7.30), short-term downstream off-season conditions are unlikely to see any substantial improvement, and end-user orders are not expected to show signs of recovery in the near term. Combined with the persistent tightness in raw material supply and elevated raw material costs, it will be hard to boost enterprises' production enthusiasm. SMM expects the operating rate for sample brass billet enterprises to edge down further to 48.78%.

This week, Shanghai spot copper premiums moved higher before pulling back. At the start of the week, Shanghai social inventory was at low levels, available cargoes were tight, and coupled with the inter-month backwardation structure support, low-priced cargoes were hard to find. The premium center continued to rise, refreshing the year-to-date high. After mid-week, as SHFE copper prices rose further, both copper prices and premiums remained high, curbing downstream purchases. Some processing enterprises, affected by accumulated finished product inventories, saw plans for production cuts or phased shutdowns. Weakening end-use consumption gradually transmitted to the spot market. Meanwhile, some suppliers actively lowered prices to offload cargoes. East China inventory stopped declining and rebounded, and spot premiums pulled back under pressure. SMM data showed that on July 23, Shanghai social inventory stood at 68,300 mt, up 2,200 mt from this Monday; Jiangsu inventory stood at 22,000 mt, up 2,400 mt from this Monday, marking the first slight inventory buildup in more than three weeks. Looking ahead to next week, Shanghai spot copper is expected to maintain its premium structure, but the center may remain under pressure. Supply side, current absolute inventory levels remain low, and available cargoes have not yet fully loosened, but east China inventory stopped declining and rebounded, and the support from low inventory for premiums is marginally weakening. In addition, SMM learned that some cargoes from LME warehouses have already been shipped to China, which are expected to arrive gradually. If arrivals increase, this may provide marginal relief to the current tight spot market. Demand side, copper prices and spot premiums are both at highs, downstream purchases are mainly for rigid demand, and the willingness to chase higher prices is insufficient. Overall, Shanghai spot copper against the SHFE 2608 contract is expected to remain at a premium next week. However, under the influence of inventory rebound, supplementary imports, and weak downstream consumption, the premium center may consolidate and pull back. Further attention should be paid to suppliers’ willingness to hold prices firm and changes in actual arrivals.

[SMM Shanghai Spot Copper] Looking ahead to tomorrow, the SHFE copper 2608 contract rose further during the night session, basically trading between 106,000 yuan/mt and 106,800 yuan/mt. With the recent synchronized increase in copper prices and spot premiums, while the SHFE contract structure maintains a backwardation structure, downstream purchase willingness has weakened significantly, with transactions mainly driven by rigid demand. According to SMM, affected by high copper prices and accumulated finished product inventories, some downstream processing enterprises plan to cut production or temporarily halt operations. The impact of weakening end-use consumption on the spot market is gradually becoming evident. In terms of supplier behavior, intraday selling drove the premium center lower. Overall, under the combined effect of high copper prices and premiums suppressing downstream demand, along with increased willingness to sell among suppliers, it is expected that spot copper quotations in Shanghai against the 2608 contract will maintain a premium tomorrow, with the overall center likely to edge down slightly.

[SMM Shanghai spot copper] Looking ahead to next week, the inter-month spread has fully shifted to a backwardation structure, with the backwardation widening to 20-90 yuan/mt. Suppliers are showing strong sentiment to hold back from selling, while social inventory continues to destock rapidly, leaving the pattern of tight available spot cargo unchanged. Overall, under the combined support of the backwardation structure, inventory destocking, and supplier reluctance to sell, Shanghai spot copper prices against the 2607 contract are expected to remain at a premium next week, with the overall strength persisting. Attention should be paid to changes in market structure around delivery and the pace of downstream restocking.