Copper futures plummeted, signaling a potential turning point in both domestic and overseas markets

Macro front, the US Beige Book indicated that the economic slowdown trend in H2 will persist, but June retail sales far exceeded market expectations, up 2.28% YoY, showing strong domestic demand. Together with the uncertainty brought by the upcoming US election, market expectations for a rate cut in September have become volatile again. Last week, the 10-year US Treasury yield remained in a low oscillation, the US dollar index fluctuated around 104 points, and risk appetite in the capital market turned conservative. The European Central Bank (ECB) kept the benchmark interest rate unchanged in its July policy meeting and did not provide clear guidance on future rate cuts, but ECB President Lagarde expressed concerns about the economic outlook during the meeting. Domestically, during the 20th Third Plenary Session, the domestic capital market remained stable, with the Shanghai Composite Index hovering around 2,970 points, and overall market policy expectations were relatively moderate. LME copper prices, unable to break through $10,000/mt amid previous long-short battles, fell from the week's high of $9,919.5/mt to test $9,328.5/mt as bulls withdrew. SHFE copper prices were relatively resilient, falling from around 80,000 yuan/mt to around 76,500 yuan/mt.
Fundamentally, copper concentrate TCs continued to recover last week, and domestic smelters showed diverging procurement attitudes. Due to the sharp decline in copper prices, with a larger drop in overseas markets, the SHFE/LME price ratio rose to a new high since January 2024, prompting importers to actively arrange imports, with active transactions. Domestic copper cathode social inventory continued its destocking trend, and under policy influence, the market generally believes that domestic copper cathode demand will increase in the future. The SHFE contango structure continued to narrow, with spot discounts climbing steadily, reaching near zero by the end of the week. Looking ahead to this week, multiple countries will release preliminary July PMI data, and the US June core PCE data will provide more guidance on the future rate cut path. Domestic raw material supply tightness expectations and the destocking trend will support SHFE copper. LME copper is expected to trade between $9,300-9,600/mt, and SHFE copper between 76,000-78,000 yuan/mt. In the spot market, despite narrowing SHFE contango structure, the inflow of imported copper due to improving SHFE/LME price ratio will continue to pose challenge to destocking. SMM sees spot discounts of 0-50 yuan/mt and premiums of 0-50 yuan/mt compared to 2408 contract.