At the beginning of this week, the market continued to trade around developments in the US-Iran agreement and the Strait of Hormuz passage issue. Early in the week, the US-Iran agreement had not yet been finalized, with Trump stating that the deal was largely done but there was no rush to sign it. Market expectations for peace talks warmed, and the copper price center edged higher. Subsequently, Iran denied imposing transit fees on the Strait of Hormuz, but divergences remained between the US and Iran on issues such as highly enriched uranium disposal, asset unfreezing, and strait passage, with Middle Eastern geopolitical developments repeatedly disrupting market sentiment. Mid-week, the US Fed signaled it would maintain stable interest rates, with the subsequent policy path still depending on inflation and employment data. Toward the end of the week, the US April core PCE rose to 3.3% YoY, and US Fed officials maintained an open stance on rate hikes. However, the overall PCE was in line with market expectations, and combined with renewed warming of expectations for a US-Iran agreement, copper prices staged a phased rebound. Overall, the macro theme this week remained the intertwining of US-Iran peace talk expectations and recurring geopolitical conflicts, with copper prices staying high and moving sideways.
Fundamentals side, the tight supply pattern in the copper market eased marginally this week. Supply side, imported copper arrivals remained relatively low, but domestic supply arrivals edged up slightly, and the spot tightness improved compared to the previous period, though high-quality copper circulation remained relatively tight. Demand side, elevated copper prices continued to suppress downstream purchase willingness, and downstream buyers mostly made just-in-time procurement for most of the week, with market trading activity remaining sluggish. However, after a phased pullback in copper prices, downstream stocking willingness improved, and spot transactions recovered marginally. Inventory side, as of Thursday, May 28, inventory increased by 1,000 mt WoW from the previous Thursday to 245,200 mt, with total inventory still significantly higher than the same period last year. Overall, the current fundamentals showed a pattern of marginally easing supply, weak demand recovery, and slight inventory accumulation, providing limited upside momentum for copper prices.
Looking ahead to next week, macro logic is expected to continue revolving around the US-Iran agreement implementation, Strait of Hormuz passage, and US Fed policy expectations. If US-Iran peace talks continue to advance, easing geopolitical risks will continue to support market risk appetite; however, if the two sides remain in a stalemate on nuclear issues, asset unfreezing, and strait passage, oil prices and inflation expectations may continue to intermittently disrupt copper prices. Fundamentals side, the rebound in domestic arrivals and slight inventory accumulation are expected to exert some downward pressure on prices, but tight import arrivals and limited high-quality copper circulation still provide support to the downside. Copper prices are expected to continue moving sideways at elevated levels in the near term. LME copper is expected to fluctuate within $13,450-13,850/mt, and SHFE copper within 103,500-106,500 yuan/mt. Spot side, against the backdrop of high copper prices suppressing procurement while low-priced supply remains limited, premiums are expected to move sideways, with actual transactions still depending on downstream restocking willingness after futures pull back.
