US dollar index rebounds, exerting upward pressure on copper prices [SMM Copper Morning Meeting Summary]

Futures Market: Overnight, LME copper opened at $9,533/mt. The price initially fluctuated, reaching a high of $9,568/mt, before pulling back and touching a low of $9,471/mt. Subsequently, the price oscillated and eventually closed at $9,502/mt, up 0.67%. Trading volume was 21,841 lots, and open interest was 291,224 lots. Overnight, the SHFE copper 2506 contract opened at 78,080 yuan/mt. The price fluctuated initially, reaching a high of 78,190 yuan/mt during the session, before fluctuating downward and touching a low of 77,620 yuan/mt. Subsequently, the price fluctuated somewhat and eventually closed at 77,820 yuan/mt, down 0.27%. Trading volume was 39,435 lots, and open interest was 180,978 lots. [SMM Copper Morning Meeting Summary] News: (1) The Joint Statement of the China-US Geneva Economic and Trade Talks was released: China and the US each canceled 91% of tariffs and suspended the implementation of 24% of tariffs. (2) Goldman Sachs pushed back expectations for US Fed interest rate cuts to the end of the year and lowered the likelihood of a US recession; Citi postponed its forecast for the next US Fed interest rate cut from June to July.

Spot: (1) Shanghai: On May 12, SMM #1 copper cathode spot prices against the front-month 2505 contract were reported at a discount of 50 yuan/mt to a premium of 20 yuan/mt, with an average price of a discount of 15 yuan/mt, down 95 yuan/mt from the previous trading day. As the delivery date approached, the SHFE copper 2505 contract saw an increase in position reduction, and the price spread between consecutive months narrowed. Spot prices gradually approached the delivery logic, but if the discount widened further, the market was expected to show purchase sentiment for delivery purposes.

(2) Guangdong: On May 12, Guangdong #1 copper cathode spot prices against the front-month contract were reported at a premium of 20 yuan/mt to 150 yuan/mt, with an average premium of 85 yuan/mt, down 70 yuan/mt from the previous trading day. Overall, the large price spread between months continued to dampen downstream purchasing interest, and spot premiums declined, with overall trading activity remaining sluggish.

(3) Imported Copper: On May 12, warrant prices ranged from $96 to $106/mt, with QP in May, and the average price fell by $2/mt from the previous trading day. B/L prices ranged from $108 to $126/mt, with QP in May, and the average price remained unchanged from the previous trading day. EQ copper (CIF B/L) prices ranged from $72 to $84/mt, with QP in May, and the average price remained unchanged from the previous trading day. Quotations referenced cargo arriving in mid-to-late May. Yesterday, the SHFE/LME price ratio did not improve, and downstream demand remained weak, resulting in sluggish market transactions and quiet offers. It was heard that among traders, offers for domestic pyrometallurgy B/Ls in late May were reported at $110, with QP in June; general pyrometallurgy offers were reported at $130-140, with QP in June; domestic warrant offers were concluded near $110, with QP in May; and EQ B/Ls were difficult to find offers for. Overall, due to the expansion of the LME backwardation structure and the weak SHFE/LME price ratio, both buyers and sellers showed low willingness to trade. Meanwhile, macro-level, new developments in China-US trade may increase copper price volatility, with overall uncertainty remaining high.

(4) Secondary copper: On May 12, the price of secondary copper raw materials remained unchanged WoW. The price of bare bright copper in Guangdong was 72,200-72,400 yuan/mt, unchanged from the previous trading day. The price difference between copper cathode and copper scrap was 1,430 yuan/mt, up 135 yuan/mt WoW. The price difference between copper cathode rod and secondary copper rod was 1,145 yuan/mt. According to an SMM survey, traders of secondary copper raw materials indicated that as copper prices continued to fluctuate around 78,000 yuan/mt, some suppliers, driven by capital needs and with small profits, were willing to sell the secondary copper raw materials they had recently acquired. As a result, the inventory of secondary copper raw material traders was relatively abundant in the short term.

(5) Inventory: On May 12, LME copper cathode inventory decreased by 1,025 mt to 190,750 mt. On the same day, SHFE warrant inventory increased by 919 mt to 20,084 mt.

Price: On the macro side, a joint statement was released on May 12 following the China-US Geneva Economic and Trade Talks: China and the US each eliminated 91% of tariffs and suspended the implementation of 24% of tariffs. After the tariff reduction agreement was reached between China and the US, market concerns about an economic recession eased, the US dollar index surged, and copper prices remained relatively firm, fluctuating at highs. On the fundamental side, copper prices fluctuated at highs. Although the price spread between futures contracts narrowed, it remained in a backwardation structure, and downstream procurement willingness was low. As of Monday, May 12, SMM's national copper inventory in major regions increased by 3,000 mt WoW to 123,100 mt. Compared to the inventory changes from the previous Friday, inventory changes varied across regions in the country. Total inventory was 277,000 mt lower than the 400,100 mt recorded in the same period last year. Overall, with the US dollar index remaining high, it is expected that there will be limited upside potential for copper prices today.

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[The above information is based on market collection and comprehensive evaluation by the SMM research team. The information provided in this article is for reference only. This article does not constitute direct advice for investment research and decision-making. Clients should make cautious decisions and should not rely on this information to replace their own independent judgment. Any decisions made by clients are unrelated to SMM.]