Geopolitical Risks Intensified; the Most-Traded BC Copper Contract Closed Down 0.41% [SMM BC Copper Commentary]

Today, the most-traded BC copper 2604 contract opened at 89,120 yuan/mt. Early in the session, the center maintained a fluctuating downward trend, hit bottom at 88,620 yuan/mt, then fluctuated upward to a high of 90,020 yuan/mt, and finally closed at 89,530 yuan/mt, down 0.41%. Open interest fell to 6,039 lots, down 89 lots from the previous trading day, while trading volume fell to 4,556 lots, down 1,782 lots from the previous session. On the macro front, Iran said it was willing to abandon its nuclear program in exchange for a “satisfactory alternative” from the US, while also cracking down on separatist forces at home; meanwhile, the US military was reported to have begun preparations for actions against Iran that could last through September. Trump explicitly opposed Khamenei’s son succeeding as Supreme Leader and encouraged the Kurds to pressure Iran, saying that although Iran was trying to seek an agreement, it had missed its chance. The escalation in the Middle East again pushed risk-off sentiment higher, the US dollar index strengthened again, and this was bearish for copper prices. On the fundamentals side, imported supply continued to arrive, and with domestic social inventory at a high level, overall market circulating supply remained ample. Demand side, enterprises resumed work and production, and together with the pullback in copper prices, downstream purchase willingness continued to recover.

The SHFE copper 2604 contract closed at 101,050 yuan/mt. Based on the BC copper 2604 contract at 89,530 yuan/mt, its after-tax price was 101,169 yuan/mt. The price spread between the SHFE copper 2604 contract and BC copper was -119 yuan/mt. The spread remained in backwardation and narrowed somewhat from the previous day.