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)

Today, the most-traded BC copper 2606 contract opened at 93,550 yuan/mt, touching a low of 93,550 yuan/mt right at the open before maintaining a fluctuating trend at highs. Near the close, it rose to 95,490 yuan/mt and ultimately settled at 94,500 yuan/mt, up 1.81%. Open interest stood at 9,614 lots, an increase of 82 lots from the previous trading day, while trading volume reached 10,260 lots, an increase of 1,881 lots from the previous trading day. On the macro front, Peru, as a major global copper exporter, issued an emergency energy crisis decree on Monday, sparking market concerns over ore supply disruptions and driving copper prices to fluctuate at highs. Fundamentals side, on the supply side, with delivery approaching, suppliers showed a stronger willingness to ship to delivery warehouses, and the spot supply landscape remained tight; on the demand side, downstream purchasing sentiment was weak due to high copper prices. The SHFE copper 2606 contract closed at 106,510 yuan/mt. Based on the BC copper 2606 contract price of 94,500 yuan/mt, its after-tax price was 106,785 yuan/mt. The price spread between the SHFE copper 2606 contract and BC copper was -275 yuan/mt, showing an inversion that widened compared to the previous day.

[SMM Shanghai Spot Copper] Looking ahead to tomorrow, Peru's energy crisis has raised market concerns over copper ore supply. Copper prices surged significantly during the night session, and end-users' acceptance of the current high copper prices and spot discounts has declined. According to SMM, downstream orders dropped sharply during the day, with purchasing sentiment subdued and dominated by rigid demand. In terms of market performance, suppliers continuously lowered their offers, and spot cargo has shifted from premiums to discounts, with the discount margin widening. However, Friday marks the last trading day of the SHFE copper 2605 contract. As delivery approaches, spot discounts are widening under the Contango price spread structure, and suppliers' willingness to ship to delivery warehouses is increasing. The delivery logic is expected to provide bottom support for spot discounts, limiting further downside room.

SMM Morning Meeting Summary: Overnight, LME copper opened at and dipped below $13,693.5/mt, moved sideways at the beginning of the session, then the copper price center fluctuated upward and probed up to $13,969/mt near the end of the session, before fluctuating downward to finally close at $13,920/mt, up 2.84%, with trading volume at 26,800 lots and open interest at 272,000 lots, an increase of 1,201 lots from the previous trading day, indicating bulls adding positions. Overnight, the most-traded SHFE copper 2606 contract opened at 105,500 yuan/mt, dipped to 105,390 yuan/mt at the beginning of the session, then the copper price center gradually shifted upward and touched a high of 107,350 yuan/mt near the end of the session, before fluctuating downward to finally close at 106,770 yuan/mt, up 2.35%, with trading volume at 75,900 lots and open interest at 209,000 lots, an increase of 4,829 lots from the previous trading day, indicating bulls adding positions.

[Inventory Buildup and Macro Tailwinds Offset Each Other, Aluminum Prices Trade in a Range] The risk of supply disruptions to aluminum outside China has not yet subsided, and the ex-China aluminum ingot supply-demand gap will continue to provide support for aluminum prices. Meanwhile, the continuation of higher-than-expected inventory buildup in China will weigh on domestic aluminum prices. At the same time, tightened invoicing regulations may lead to structural tightness in spot cargo, and the weakening spot market will further limit upside room for domestic aluminum prices. Close attention should be paid to the potential emergence of a turning point in China's social inventory, which could drive a rebound and rise in aluminum prices.

Today, the most-traded BC copper contract 2606 opened at 92,910 yuan/mt, touching a low of 92,060 yuan/mt at the beginning of the session before the center fluctuated upward. It probed up to 92,930 yuan/mt near the close and ultimately settled at 92,820 yuan/mt, down 0.03%. Open interest stood at 9,532 lots, down 304 lots from the previous trading day, while trading volume was 8,379 lots, down 736 lots from the previous trading day. On the macro front, US April non-farm payrolls added 115,000 jobs, significantly exceeding market expectations. The unemployment rate remained stable, but the consumer confidence index fell to a new periodic low. Meanwhile, disturbed by concerns over ore-side shortages, copper prices exhibited a high-level fluctuating trend moving sideways. Fundamentals side, short-term import arrivals saw limited incremental volumes, domestic supply arrivals remained relatively low, and the supply landscape stayed tight. Demand side, downstream acceptance of high copper prices was limited, with procurement mainly driven by rigid demand and insufficient willingness to chase higher prices. As of Monday, May 11, SMM copper inventories across mainstream regions nationwide decreased by 10,300 mt WoW from after the holiday to 242,600 mt. The SHFE copper 2606 contract closed at 104,620 yuan/mt. Based on the BC copper 2606 contract price of 92,820 yuan/mt, its after-tax price was 104,887 yuan/mt. The price spread between the SHFE copper 2606 contract and BC copper was -267 yuan/mt, showing an inversion that narrowed from the previous day.

[SMM Analysis]Secondary Aluminum Operating Rate Declined in April, with Downward Pressure Persisting in May

Policy Intensity Reshaping the Landscape, Costs Returning to Highs, and Structural Tightening of Market Supply

SMM Morning Meeting Summary: Last Friday evening, LME copper opened at $13,522.5/mt, fluctuated downward to $13,484.5/mt in early trading, then experienced wild swings reaching a high of $13,583/mt, before fluctuating downward to finally close at $13,535.5/mt, up 1.59%, with trading volume at 29,500 lots and open interest at 271,000 lots, down 1,154 lots from the previous trading day, indicating bears cutting positions. Last Friday evening, the most-traded SHFE copper 2606 contract opened at 104,500 yuan/mt, rose to 104,580 yuan/mt in early trading, then fluctuated downward to 103,690 yuan/mt, moved sideways near the end of the session to finally close at 104,200 yuan/mt, up 0.53%, with trading volume at 50,000 lots and open interest at 208,000 lots, down 1,584 lots from the previous trading day, indicating bears cutting positions.

[SMM Analysis: NPI Prices Rose Sharply, Market Shifted to High-Level Standoff] The average price of SMM 10-12% high-grade NPI rose 30.5 yuan/nickel unit WoW to 1,150.5 yuan/nickel unit (ex-factory, tax included), while the average Indonesian NPI FOB index price rose 3.58 $/nickel unit WoW to 146.78 $/nickel unit. This week, policies and futures drove prices steadily higher, with the NPI price center moving further up.