Contango declines, downstream purchasing sentiment warms up [SMM Copper Morning Meeting Summary]

Futures Market: Overnight, LME copper opened at $9,542.5/mt, rose initially and peaked at $9,567/mt, then fluctuated downward throughout the session, dipping to a low of $9,487/mt near the close, and finally closed at $9,487/mt, down 0.71%. Trading volume reached 14,000 lots, and open interest stood at 285,000 lots. Overnight, the most-traded SHFE copper 2506 contract opened at and peaked at 78,010 yuan/mt, maintained a narrow rangebound fluctuation during the session, dipped slightly near the close to a low of 77,770 yuan/mt, and finally closed at 77,770 yuan/mt, down 0.41%. Trading volume reached 21,000 lots, and open interest stood at 159,000 lots.

[SMM Copper Morning Meeting Summary] News: (1) The EU has stated that it will impose handling fees on small parcels entering the EU, most of which originate from China. In response, the Chinese Foreign Ministry spokesperson suggested referring specific questions to the competent Chinese authorities. China believes that fostering an open and inclusive trading environment serves the common interests of all parties and hopes that the EU will uphold its commitment to openness, provide a fair, transparent, and non-discriminatory business environment for Chinese enterprises, and create favorable conditions for China-EU economic and trade cooperation.

(2) The online public consultation for the formulation of the "15th Five-Year Plan" was recently launched. According to reports, the online consultation has set up dedicated columns for suggestions on the "15th Five-Year Plan" on the official websites and news apps of People's Daily, Xinhua News Agency, and China Media Group, as well as on the "Xuexi Qiangguo" learning platform. Netizens can access the relevant pages to offer their suggestions. The online consultation will last for one month, and relevant suggestions and opinions will be compiled and provided to the central government for decision-making reference.

Spot Market: (1) Shanghai: On May 21, SMM #1 copper cathode spot premiums against the front-month 2506 contract were reported at a range of 200-350 yuan/mt, with an average premium of 275 yuan/mt, down 115 yuan/mt WoW. The selling sentiment index fell to 3.12 yesterday, mainly because some smelters did not directly sell, and the market was dominated by low-price selling by import traders and warrant-holding traders. The purchasing sentiment index rose to 3.26, primarily due to the decline in premiums, which encouraged downstream buyers to bargain down purchasing prices. It is expected that warrant-holding and import suppliers will continue to have a strong selling sentiment today, and spot premiums may still be suppressed. However, it should be noted that when premiums fall below 100 yuan/mt, the market purchasing sentiment may further increase.

(2) Guangdong: On May 21, Guangdong #1 copper cathode spot premiums against the front-month contract were reported at a range of 140-230 yuan/mt, with an average premium of 185 yuan/mt, down 5 yuan/mt WoW. Overall, after the continuous decline in premiums, downstream buyers began to restock, and overall trading activity was better than the previous day.

(3) Imported copper: Warehouse warrant prices ranged from $90 to $98/mt, with QP in June, and the average price remained flat MoM. B/L prices ranged from $102 to $118/mt, with QP in June, and the average price remained flat MoM. EQ copper (CIF B/L) prices ranged from $73 to $83/mt, with QP in June, and the average price fell by $1/mt MoM. Quotations referenced cargo arriving in late May and early June. Overall, domestic copper remained the main supply in late May, with limited non-registered spot orders. However, the SHFE/LME price ratio performed poorly, and subsequent premiums are expected to have downside room.

(4) Secondary copper: On May 21, the price of secondary copper raw materials rose by 300 yuan/mt MoM. Guangdong bare bright copper prices ranged from 72,500 to 72,700 yuan/mt, up 300 yuan/mt from the previous trading day. The price difference between copper cathode and copper scrap was 1,191 yuan/mt, down 174 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 1,115 yuan/mt. According to the SMM survey, amid fluctuating copper prices, secondary copper raw material prices remained high. Since May, secondary copper rod sales have sustained losses of 200-300 yuan/mt. Many secondary copper rod enterprises have slowed production, only operating 2-3 furnaces per week.

(5) Inventory: On May 21, LME copper cathode inventory decreased by 1,925 mt to 168,825 mt. On the same day, SHFE warrant inventory decreased by 4,520 mt to 41,218 mt.

Price: On the macro front, the US and Iran have held multiple rounds of talks on Iran's nuclear program this year, with Trump previously restarting actions to tighten sanctions on Iran's crude oil exports. Sources said Israel is preparing to swiftly strike Iran's nuclear facilities if US-Iran negotiations collapse. Affected by this, both crude oil prices rose first and then fell, exerting downward pressure on copper prices. On the fundamental front, from the supply side, some smelters did not directly ship products, and the market was mainly supplied by imported traders and warrant holders at lower prices, with a decline in shipping sentiment. From the demand side, as spot premiums fell, downstream purchasing sentiment indices rose, and bargain down purchasing prices were actively pursued. In terms of price, with no more bearish news currently, copper prices are expected to have limited downside room 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 independent judgment. Any decisions made by clients are unrelated to SMM.]