[SMM Brass Billet News Flash] Affected by wild swings in copper prices, cost uncertainty increased. End-user wait-and-see sentiment was strong, and the pace of taking orders and picking up goods slowed down, leading to some accumulation of finished product inventories at brass billet enterprises.

This week (5.8-5.14), the operating rate of the brass billet industry was 52.34%, up 7.67 percentage points WoW. The impact of the post-holiday period gradually faded, and industry production saw a slight recovery. However, affected by the arrival of the traditional consumption off-season, the recovery in operating rates was insufficient and unable to rebound to pre-holiday levels. Supply side, recycled brass raw materials supply remained tight, enterprise raw material inventories continued to decline, and production was subject to certain constraints. Meanwhile, copper prices swung wildly, cost uncertainty increased, end-user wait-and-see sentiment was strong, and the pace of taking orders and picking up goods slowed down, leading to a buildup of finished product inventories at enterprises. Looking ahead to next week (5.15-5.21), SMM expects the industry operating rate to decline 0.23 percentage points WoW to 52.11%. The industry has currently entered the traditional off-season. Coupled with copper prices fluctuating at highs and weak follow-through on end-user orders, the industry operating rate is unlikely to improve in the short term and is expected to remain at low levels.

[Bulls Cut Open Interest, Silicon Metal Prices Weakened; Polysilicon Prices Remained Stable Overall]: Spot prices were mostly stable this week, with prices of certain silicon grades edging down slightly. As of May 14, SMM east China oxygen-blown #553 silicon was at 9,200-9,400 yuan/mt, down 50 yuan/mt WoW; #441 silicon was at 9,400-9,600 yuan/mt, flat WoW; #3303 silicon was at 10,100-10,300 yuan/mt, flat WoW. Futures market sentiment cooled. In terms of total open interest, it began to decline sharply from Tuesday as funds took profits and exited, causing futures prices to pull back. On Thursday (May 14), total open interest in silicon metal stood at 450,000 lots, down 85,000 lots or 16% from Monday. The most-traded SI2609 contract closed at 8,655 yuan/mt on Thursday, down 455 yuan/mt or 5% from Monday, as the silicon market returned to fundamentals-driven logic. Transaction side, downstream users showed strong wait-and-see sentiment amid the price fluctuations, with transactions mainly driven by rigid restocking demand.

Iron ore futures showed a weak-then-strong pattern today. The most-traded contract I2609 ultimately closed at 817 yuan/mt, basically flat compared to the previous trading day. Port spot prices were down 2-5 yuan/mt from the previous day. Traders offered prices in line with the market; steel mills purchased as needed; overall spot trading sentiment was lukewarm. SMM ten-port data by product category showed that total port inventory fell 1.7 million mt MoM from pre-holiday levels, with fines, concentrates, and lump ore all destocking. By major product, inventories of Jimblebar fines, blended fines, Mac fines, and super special fines declined notably, while inventories of IOCJ fines, PB fines, PB lump, and Newman fines increased somewhat, posing certain pressure on future prices. On the macro front, market attention today focused on Trump's visit to China. As of now, no positive news has emerged, and attention should be paid to the impact of subsequent news on futures. Ore prices are expected to maintain a fluctuating trend at highs in the short term.

SMM May 14 Update: Guangdong region: Premiums in this region fluctuated at highs this week. Although copper prices surged significantly, suppliers maintained a bullish stance on premiums and were unwilling to lower prices for shipments, keeping premiums firm. As of Thursday, high-quality copper was quoted at 270 yuan/mt, on par with last Thursday; standard-quality copper premiums were quoted at 200 yuan/mt, up 10 yuan/mt from last Thursday; SX-EW copper was quoted at 130 yuan/mt, up 10 yuan/mt from last Thursday. On Thursday, the price spread of standard-quality copper premiums between Shanghai and Guangdong showed Guangdong higher by 280 yuan/mt. Given the large price spread, cargoes from Jiangxi and Hunan moved southward. According to SMM statistics, as of Thursday, total inventory in Guangdong warehouses was 16,800 mt, down 1,500 mt from last Thursday, with warrants totaling 5,100 mt, up 675 mt from last Thursday. Specifically: Arrivals at warehouses this week were 13,000 mt/week, up 1,100 mt/week WoW, below the annual average (14,000 mt/week); increased arrivals from northern sources were the main reason. Warehouse withdrawals were 14,800 mt/week, up 3,600 mt WoW, slightly above the annual average (14,200 mt/week). As downstream restocking before the holiday was limited, end-user enterprises began restocking after the holiday, driving up warehouse withdrawals. Looking ahead to next week, as copper prices hover at historical highs, end-user cargo pick-up enthusiasm declined notably this week, and finished product inventories at many copper processing enterprises increased. Production cuts are expected next week. Therefore, inventory is expected to edge up next week, and premiums are expected to hover at highs without further climbing. (The above information is derived from market data collection and comprehensive assessment by the SMM research team. The information provided in this article is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not replace independent judgment with this information. Any decisions made by clients are not related to SMM.)

SMM May 14 Update: Data Brief: As of Thursday, May 14, SMM copper inventories across major regions nationwide increased by 700 mt WoW from Thursday to 243,300 mt, with total inventory up 111,300 mt compared to the same period last year (132,000 mt). Specifically, arrivals of both imported and domestic copper in Shanghai pulled back, while demand was dragged down by persistently rising copper prices, with subdued downstream transactions and relatively small overall inventory fluctuations. Inventory in Jiangsu remained flat from Monday, with the pace of inbound and outbound shipments staying stable. In Guangdong, domestic copper arrivals saw a notable increase, but high copper prices suppressed downstream processing enterprises' production and consumption, leading to a slight inventory buildup in the region. Market outlook: Supply side, imported copper arrivals are expected to increase in the near term, while domestic copper arrivals are also expected to see a slight rebound. Demand side, as copper prices moderately pull back, rigid demand in the market is expected to be gradually released, though the overall recovery momentum remains limited. The current market features a pattern of relatively tight supply with rigid demand underpinning consumption. Social inventory is expected to continue a modest inventory buildup trend next week.

[SMM Analysis] Copper prices have surged recently. On the surface, the current hot topics in the copper market are focused on the following areas: the widening LME-COMEX price spread, copper concentrate TCs hitting new lows again, the energy crisis in Peru, the repeated fluctuations in the pace of Grasberg's production resumptions, and the substitution effect between copper cathode and copper scrap in China. However, from a deeper perspective, all these events can be understood under a single theme: the growing global emphasis on copper resource security, with the market repricing the entire industry chain.

[SMM Analysis] After Sulfur Breaks Through $1,200: How Far Is the Ceiling? — The Ultimate Game Under International Supply Disruptions, Discussing China's Sulfur Policies and International Supplementary Supply Pathways

Driven by recovering risk appetite and China's peak demand season, copper prices both in China and abroad bottomed out since late March. However, as SHFE copper returned to the 100,000 level, the tug-of-war between longs and shorts increased, and futures prices shifted to range-bound consolidation. After the Labour Day holiday, copper prices quickly resumed their upward momentum. Today, prices opened higher with a gap and continued to rise, with SHFE copper just one step away from the record high set at the end of January, while LME copper hit a new closing high. What is fueling such strong confidence behind this rally? Deepening Ore-Side Vulnerability Intensifies Supply Disruption Concerns Since the suspension of First Quantum's Cobre Panama copper mine at the end of 2023, spot TC for copper concentrates in China has been caught in an endless downward spiral. Falling from around $80/dmt at the end of 2023, it largely dropped to single-digit levels and moved sideways in 2024. Entering 2025, it further plunged into negative territory, mainly due to successive production disruptions at world-class copper mines including Ivanhoe Mines' Kakula, Codelco's El Teniente, and Freeport's Grasberg mine in Indonesia. Entering 2026, global major copper ore supply growth remained limited, and the ore tightness showed no improvement. The latest data showed that spot TC for copper concentrates in China had fallen below -$90/dmt. With long-term contract TC at zero and spot TC declines accelerating, domestic smelters' production profits mainly relied on surging sulphuric acid prices and firm by-product prices of gold, silver, and other metals to compensate. It was reported that current sulphuric acid revenue could already cover smelters' procurement costs for copper concentrates and part of the processing costs, enabling domestic smelters to maintain relatively high operating rates, and the ore tightness had not yet notably transmitted to the smelting side. It is worth noting that sulphuric acid is not only a by-product of pyrometallurgy but also a core production material for SX-EW copper. For every 1 mt of copper produced, 5–6 mt of sulphuric acid is consumed. Sulphuric acid costs account for 40%–50% of total SX-EW copper production costs, and SX-EW copper production accounts for approximately 20% of global mine copper production. Since the beginning of this year, sulphuric acid prices surged sharply due to multiple factors, and ex-China sulphuric acid supply was periodically disrupted, raising concerns that copper supply in some countries could be affected. Focusing on the reasons behind the sulphuric acid price surge: on one hand, since the escalation of the Middle East conflict on February 28, shipping through the Strait of Hormuz has been broadly restricted and has recently faced a dual blockade by Iran and the US. Sulphur exports from the Middle East have been impacted, with the DRC and Zambia being the most concentrated SX-EW copper producing regions that are highly dependent on sulphur imports from the Middle East. As sulphur supply has been constrained, sulphuric acid prices have naturally risen in tandem, not only raising local SX-EW copper production costs but also potentially triggering further production cuts if the Strait of Hormuz blockade continues and sulphur disruption risks escalate. On the other hand, to prioritise domestic spring ploughing phosphate fertiliser production and support new energy industry expansion, China has imposed a phased ban on sulphuric acid exports according to industry sources. Chile has a relatively high dependence on Chinese sulphuric acid, with SX-EW copper accounting for around 20% of its output, and the market is also concerned that Chile's SX-EW copper production may be affected. In addition, against the backdrop of an already fragile copper ore supply, frequent news shocks from outside China recently have undoubtedly intensified market concerns. Last week, market rumours suggested that the full restart of Indonesia's Grasberg copper-gold mine, which declared force majeure in September last year, had been delayed by one year, driving SHFE copper sharply higher in the afternoon of 8 May. However, according to the latest update from Freeport-McMoRan, the company still expects Indonesia's Grasberg copper-gold mine to fully resume production by the end of 2027, reaffirming the plan outlined last month and refuting reports that production resumptions could be delayed to 2028. Furthermore, yesterday Peru declared an emergency energy decree due to a natural gas pipeline explosion. Peru's copper production reached 2.63 million mt in metal content last year, ranking third globally. Copper mining and smelting are relatively sensitive to power stability, and the market is concerned that Peru's energy strain may disrupt local copper supply. Overall, China's copper cathode production remains relatively stable, but some major global miners lowered their full-year production guidance in Q1, the ore tightness persists, sulphuric acid supply — a core raw material for ex-China SX-EW copper — is constrained, and there are multiple supply disruption themes on the copper supply side, which can easily boost copper prices once the macro front stabilises. Global Copper Visible Inventory Divergence: China Destocking Provides Support Last year, driven by the US government's threat to impose additional tariffs on imported copper, global copper continued to flow into the US, causing COMEX copper inventories to accumulate continuously while copper inventories in non-US regions remained low, providing sustained support for copper prices. In February this year, the US Supreme Court struck down most of the tariff measures introduced by the Trump administration in 2025. The Trump administration subsequently turned to Section 122 of the Trade Act of 1974 to push new global tariff policies. On 7 May, the US Court of International Trade issued a ruling stating that the legal basis for imposing a 10% global import tariff was invalid. The tug-of-war between US courts and the Trump administration over tariffs has continued recently, but the market has certain expectations that the US may subsequently impose additional tariffs on imported copper. Under such expectations, the price spread between COMEX copper and LME copper has shown a slight strengthening trend recently, meaning copper in LME warehouses still has the potential to flow to the US. Specifically, COMEX copper inventories have continued to rebound since mid-April, rising from around 590,000 mt to the latest 620,000 mt, again hitting a multi-year high. Correspondingly, LME copper inventories pulled back from around 400,000 mt in mid-April, declining to 397,700 mt on 6 May. They have rebounded with fluctuations recently, but overall inventories have not exceeded the over-12-year high set in mid-April. SHFE copper inventories fell for the eighth consecutive week, currently dropping to 181,300 mt, the lowest since the beginning of the year. Data source: Webstock Inc. Overall, on the macro front, there are currently disagreements in US-Iran negotiations, but both sides continue the ceasefire with no recent signs of escalation in conflict. Energy prices pulled back from late April levels, inflation concerns eased somewhat, the US dollar index was in the doldrums, and combined with the AI boom lifting global stock markets, market risk appetite was moderate, providing a fertile ground for copper prices to strengthen. Focusing on copper's own fundamentals, inventories outside China remained elevated, but significant prior destocking of China inventories provided support. The ore tightness was difficult to reverse, and supply-side narratives were abundant, meaning copper prices may still hold up well. However, it is worth noting that the Middle East situation remains the biggest macro variable, and the policy path following the Fed Chairman's power transition also deserves close attention. (Webstock Composite)

Zhangjiagang HRC port inventories stood at 308,000 mt this week, down 8,000 mt WoW, a decline of 2.53%; the solar calendar YoY decline was 16.98%, and the lunar calendar YoY decline was 22.03%.