Domestic Trade Premiums Hold Steady and Rise, Fundamental Consumption Maintains Resilience [SMM Copper Morning Meeting Summary]

Jun 16 Tue

Jun 17 Wed

Futures: Overnight LME copper opened at $13,744/mt, briefly dipped to $13,725/mt, then its price center fluctuated upward to touch $13,822.5/mt. The center subsequently swung wildly before the contract settled at $13,796.5/mt, up 0.61%. Trading volume reached 16,600 lots, and open interest stood at 263,000 lots, down 3,509 lots from the previous trading day, indicating position reductions by bears. Overnight, the most-traded SHFE copper 2607 contract opened at 105,490 yuan/mt, hit a high of 105,700 yuan/mt right after opening, then its price center fluctuated downward all the way, touching a low of 105,060 yuan/mt near the close, and finally settled at 105,210 yuan/mt, down 0.14%. Trading volume was 25,000 lots, and open interest was 147,000 lots, down 1,715 lots from the previous trading day, indicating position reductions by bulls.

[SMM Copper Morning Brief] News:

(1) On Tuesday, June 16, Argentina’s Minister of Economy Luis Caputo stated that Argentina has approved the $9.7 billion Vicuna copper mine project to join the country’s large-scale investment tax incentive scheme. The mine will be jointly operated by Australia’s BHP and Canada’s Lundin Mining and is expected to become the largest mining development project in Argentina’s history and one of the top five copper mines globally. Caputo said the project’s investment could reach as high as $18 billion, and the mine is expected to generate over $2.6 billion in export value annually.

Spot:

(1) Shanghai: On June 16, the SHFE copper 2607 contract showed a pattern of multiple dips, stabilization and recovery in early trading. It opened at 105,210 yuan/mt, then quickly rallied to 104,510 yuan/mt before edging down to 104,260 yuan/mt, after which it stabilized and recovered to 104,730 yuan/mt. The price then edged slightly lower before continuing to rise, touching a high of 105,020 yuan/mt. By the close, the price had edged down to settle at 104,800 yuan/mt. The inter-month spread was between a contango of 60 yuan/mt and a backwardation of 20 yuan/mt. The import profit margin for SHFE copper against the front-month 2606 contract ranged from a loss of 270 yuan/mt to a loss of 180 yuan/mt. June 16 was the first trading day after contract rollover, and the spot market officially priced against the 2607 contract. Trading in Shanghai was overall sluggish. Suppliers quoted premiums of 10-30 yuan/mt in early trading, but transactions failed to follow through. In the second session, they continuously lowered quotes to discounts of around 20 yuan/mt before minor deals were done, reflecting limited acceptance of current copper prices by downstream users, with procurement mainly just-in-time and little willingness to chase higher prices. In terms of regional structure, spot premiums in Changzhou were moderate at 10-20 yuan/mt due to tight availability of cargoes, forming a price spread with the Shanghai market. This may subsequently attract east China cargoes to flow across regions, providing marginal support to discounts in Shanghai. Overall, given weak demand and regional supply divergence, spot premiums for SHFE copper against the 2607 contract are expected to be at small discounts today.

(2) Guangdong: On June 16, #1 copper cathode spot against the front-month contract: high-quality copper was quoted at a premium of 210 yuan/mt, down 30 yuan/mt from the previous trading day; standard-quality copper at a premium of 150 yuan/mt, down 30 yuan/mt; and SX-EW copper at a premium of 90 yuan/mt, down 30 yuan/mt. The average price of #1 copper cathode in Guangdong was 104,935 yuan/mt, down 875 yuan/mt from the previous trading day, and the average price of SX-EW copper was 104,845 yuan/mt, also down 875 yuan/mt. Overall, with inventory continuing to rise, suppliers took the initiative to lower prices for shipments. Downstream restocking increased, and overall trading improved compared to the previous day. The market will focus on whether arrivals continue to increase going forward.

(3) Imported copper: On June 16, the average warrant price was flat from the previous day at $59/mt (range $54~64/mt); the average B/L price was flat at $61/mt (range $55~67/mt); the average price of EQ copper (CIF B/L) rose $4/mt from the previous day to $33/mt (range $30~36/mt), with quotes referencing arrivals in mid-to-late June and early July.

(4) Secondary copper: On June 16 at 11:30, the futures closing price was 104,860 yuan/mt, down 790 yuan/mt from the previous trading day. Spot premiums averaged 25 yuan/mt, down 20 yuan/mt. Today, secondary copper raw material prices fell 200 yuan/mt MoM. The sales sentiment index for secondary copper raw material dropped to 2.45, while the procurement sentiment index rose to 2.3. The price difference between copper cathode and copper scrap was 2,483 yuan/mt, down 586 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 1,030 yuan/mt. According to an SMM survey, in south China, due to compliance work on “reverse invoicing,” secondary copper rod enterprises in Hubei and Jiangxi saw large-scale production stoppages. With a noticeable decline in secondary copper rod supply, traders in south China reported that shaft furnace rods were in undersupply, in stark contrast to sluggish sales in north China.

Price: On the macro front, the US said it would allow Iran to export crude oil immediately after the agreement is implemented and plans to include in the agreement waiving transit fees through the Strait of Hormuz. Positive progress in US-Iran negotiations continues to support copper prices, while crude oil prices fell to a low since March. However, with the Fed meeting approaching, the market’s prevailing hawkish expectations capped the upside room for copper prices, as the market cautiously awaits policy signals from the meeting. Fundamentals side, overall market cargo circulation remained tight, but available cargoes in east China were unevenly distributed. Demand side, downstream willingness to chase prices higher was limited, with only just-in-time procurement. Overall, copper prices are expected to hold up well and fluctuate today.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not use this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]