US Copper Maintains High Price Spread Over LME Copper; Volatility Risks in Copper Prices Persist [Institutional Commentary]

Domestic commodity sentiment warmed up, with copper prices surging on supply concerns, while potential US tariff reductions could lead to a price pullback. LME copper closed 0.84% higher at $9,934/mt, and the most-traded SHFE copper contract settled at 81,490 yuan/mt. On the industry front, LME inventory fell by 2,825 mt to 221,775 mt, and the ratio of cancelled warrants increased to 50.2%. The Cash/3M discount narrowed to $39.6/mt. Domestically, limited import availability and improved consumption due to price declines accelerated destocking over the weekend. In the Shanghai area, spot discounts narrowed to parity with futures. As the futures market structure tightened and supply tightness concerns grew, downstream buying interest picked up. In Guangdong, inventory increased MoM, and suppliers' sentiment to stand firm on quotes weakened, with spot premiums over futures dropping to 190 yuan/mt. In terms of imports and exports, domestic spot copper import losses narrowed to around 650 yuan/mt, and Yangshan copper premiums continued to rise. For copper scrap, the price difference between primary metal and scrap widened slightly to 2,330 yuan/mt, enhancing the substitution advantage of scrap. On the price front, the market strongly expects the US to impose additional tariffs, keeping the price gap between US and LME copper high. Given the uncertainty in the extent of the tariff hike, there is still a risk of price volatility. Meanwhile, copper concentrate TCs continued to decline, with no signs of bottoming out yet. The tug-of-war between Indonesian and Panamanian mine inventory exports and smelter maintenance continues. In summary, copper prices may still have room to rise, but as prices increase, one should be cautious of negative feedback from consumption and the risk of bullish factors being fully priced in after the US imposes additional tariffs. Today, the most-traded SHFE copper contract is expected to trade within the range of 80,500-82,000 yuan/mt; LME 3M copper is expected to trade within the range of $9,800-10,000/mt.