Bullish and bearish factors coexist, copper prices encounter resistance [SMM Copper Morning Meeting Summary]

Futures Market: On Friday evening, LME copper opened at $9,519/mt, initially touching a high of $9,541.5/mt before slightly declining and then continuing to rise. It pulled back towards the end of the session, touching a low of $9,430/mt, and ultimately closed at $9,440/mt, marking a 1.67% decline. Trading volume reached 14,000 lots, and open interest stood at 294,000 lots. On the same evening, the most-traded SHFE copper 2506 contract opened at 77,920 yuan/mt, initially touching a high of 78,090 yuan/mt before fluctuating downward and touching a low of 77,550 yuan/mt during the session. It consolidated sideways towards the end and ultimately closed at 77,670 yuan/mt, marking a 0.82% decline. Trading volume reached 34,000 lots, and open interest stood at 176,000 lots.

[SMM Copper Morning Meeting Summary] News: (1) US Treasury Secretary Scott Bessent responded to Moody's downgrade of the US credit rating, stating that he does not place much faith in Moody's and that their ratings "lag behind indicators." Bessent claimed that the US GDP growth rate will exceed the debt growth rate. Regarding tariffs, Bessent indicated that many regional agreements would be reached. He stated that the US is focusing tariff discussions on 18 key trading partners. Bessent also mentioned that he did speak with Walmart CEO Doug McMillon on Saturday, and that Walmart would bear some of the tariff costs.

(2) US President Trump stated that within the next two to three weeks, the US might unilaterally impose new tariff rates on many trading partners. Meanwhile, Trump has been continuously voicing support for the US stock market, attempting to alleviate investor concerns about tariff policies. Trump previously stated that US Treasury Secretary Bessent understands the market well, and that whenever Bessent appears on television, the stock market rises.

Spot: (1) Shanghai: On May 16, SMM #1 copper cathode spot premiums against the front-month 2506 contract were reported at 420-470 yuan/mt, with an average premium of 445 yuan/mt, up 425 yuan/mt WoW. The outflow of warrants on Tuesday and Wednesday last week will exert downward pressure on premiums. It is expected that premiums of 400 yuan/mt this week will gradually pull back, but downstream purchases at lower prices are anticipated to boost market trading activity.

(2) Guangdong: On May 16, Guangdong #1 copper cathode spot premiums against the front-month contract were reported at 310-410 yuan/mt, with an average premium of 360 yuan/mt, up 385 yuan/mt WoW. Overall, spot premiums surged on the first day after the contract rollover, but downstream buyers did not accept the higher premiums, resulting in weak overall trading activity.

(3) Imported Copper: On May 16, warrant prices were at $90-100/mt, with QP June, and the average price fell $5/mt WoW. B/L prices were at $102-120/mt, with QP June, and the average price fell $4/mt WoW. EQ copper (CIF B/L) prices were at $74-86/mt, with QP June, and the average price fell $2/mt WoW. Quotations referenced cargo arriving in mid-to-late May. Overall, market sentiment among sellers to ship goods has increased, but transaction volumes remain limited.

(4) Secondary copper: On May 16, the price of secondary copper raw materials remained unchanged on a WoW basis. In Guangdong, the price of bare bright copper was 72,400-72,600 yuan/mt, unchanged from the previous trading day. The price difference between copper cathode and copper scrap was 1,667 yuan/mt, up 215 yuan/mt WoW. The price difference between copper cathode rod and secondary copper rod was 1,245 yuan/mt. According to an SMM survey, secondary copper raw material import traders have gradually adapted to high-coefficient overseas quotes, such as for bare bright copper prices. Previously, traders could not accept overseas supplier quotes of 99.2%-99.5%, but this week, traders reported that with the opening of the import window, they could appropriately purchase some bare bright copper with a 99.2% coefficient. Although profits were minimal, this could ensure the normal operation of corporate transactions.

(5) Inventory: On May 16, LME copper cathode inventories decreased by 5,275 mt to 179,375 mt. On the same day, SHFE warrant inventories increased by 2,712 mt to 63,247 mt.

Price: On the macro front, the latest round of economic data showed a rebound in import prices in April, while consumer confidence remained low in May due to heightened concerns about the impact of President Trump's trade policies. The US dollar index first fell and then rose, with copper prices following a similar pattern. Meanwhile, US Treasury Secretary Bessent stated on Sunday that if countries fail to reach a trade agreement within the 90-day tariff suspension period, tariff rates will soon revert to "reciprocal" levels. On the fundamental front, the SHFE copper 2506 contract officially began trading on Friday, with warehouse warrants backing up, leading to tight spot cargo availability. Suppliers held firm on their quotes, with significant differences in premiums for different copper grades. This week, the outflow of warrants may suppress premiums, but expectations of downstream purchases at lower prices may boost transaction volumes, with bullish and bearish factors coexisting. In terms of price, it is expected that there will still be room for price fluctuations on the upside for copper today.

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