US dollar weakens, copper prices hold up well [SMM Copper Morning Meeting Summary]

Futures Market: Overnight, LME copper opened at $9,463.5/mt, dipping to a low of $9,433.5/mt shortly after the opening bell. It then fluctuated upward, reaching a high of $9,519.5/mt near the close, and ultimately settled at $9,519.5/mt, up 0.34%. Trading volume reached 14,000 lots, and open interest stood at 287,000 lots. Overnight, the most-traded SHFE copper 2506 contract opened at 77,730 yuan/mt, dipping slightly to a low of 77,600 yuan/mt shortly after the opening bell. It then fluctuated upward, reaching a high of 77,910 yuan/mt near the close, and ultimately settled at 77,820 yuan/mt, down 0.12%. Trading volume reached 20,000 lots, and open interest stood at 153,000 lots.

[SMM Copper Morning Meeting Summary] News: (1) After last-minute tweaks before the vote, the landmark tax cut bill proposed for Trump's 2.0 term narrowly passed the US House of Representatives, with the number of votes in favor exceeding those against by just one vote, and was sent to the Senate. Republicans, including US President Trump, temporarily hailed the victory after the bill was approved in the House. However, given the controversy over the US government's escalating debt and the infighting within the Republican Party, it appears that the bill, which proposes massive tax cuts and spending, will face significant challenges in passing smoothly through the Senate. Republicans in the Senate have already pledged to make some changes to the version of the bill passed by the House, which means there will inevitably be a "tug-of-war" in the Senate.

(2) At a press conference, Guo Wuping, spokesperson for the National Financial Regulatory Administration, stated that the initial pilot scale for the long-term investment reform pilot program for insurance funds was 50 billion yuan, the second pilot was 112 billion yuan, and the third pilot of 60 billion yuan was recently approved, bringing the total scale to 222 billion yuan.

Spot: (1) Shanghai: On May 22, SMM #1 copper cathode spot prices were quoted at a premium of 110-160 yuan/mt against the front-month 2506 contract, with an average premium of 135 yuan/mt, down 140 yuan/mt WoW. As it was Friday, low-priced supplies were largely purchased, and warrant liquidation was evident. However, warehouse inventory did not decline as expected. It is anticipated that the center of the premium will still struggle to rebound significantly today.

(2) Guangdong: On May 22, Guangdong #1 copper cathode spot prices were quoted at a premium of 160-250 yuan/mt against the front-month contract, with an average premium of 205 yuan/mt, up 20 yuan/mt WoW. Overall, both inventory and copper prices declined, with suppliers refusing to budge on prices, leading to slightly better trading activity compared to the previous day.

(3) Imported Copper: On May 22, warrant prices ranged from $90 to $98/mt, with a QP of June, and the average price remained unchanged WoW. B/L prices ranged from $102 to $118/mt, with a QP of June, and the average price remained unchanged WoW. EQ copper (CIF B/L) prices ranged from $73 to $83/mt, with a QP of June, and the average price fell by $1/mt WoW. Quotations were based on cargo arrivals expected in late May and early June. Overall, domestic copper remained the main arrival in the latter half of the month, with non-registered spot orders still scarce. However, the SHFE/LME price ratio performed poorly, and the premium is expected to have further downside room.

(4) Secondary copper: On May 22, the price of secondary copper raw materials fell by 100 yuan/mt MoM. The price of bare bright copper in Guangdong was 72,400-72,600 yuan/mt, down 100 yuan/mt from the previous trading day. The price difference between copper cathode and copper scrap was 987 yuan/mt, down 204 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 1,015 yuan/mt. According to an SMM survey, due to high raw material prices, secondary copper rod enterprises have not purchased excessive amounts of secondary copper raw materials, only ensuring enough for daily production needs.

(5) Inventory: On May 22, LME copper cathode inventory decreased by 2,300 mt to 166,525 mt. On the same day, SHFE warrant inventory fell by 9,464 mt to 31,754 mt.

Price: On the macro front, Trump's tax reform bill narrowly passed the House of Representatives and was sent to the Senate for review. US Treasury yields pulled back from recent highs, and the US dollar rose on Thursday after three consecutive days of decline. LME copper dropped slightly. On the fundamental front, from the supply side, warrant inventory has significantly decreased, but warehouse inventory has not decreased as expected. As of Thursday, May 22, SMM copper inventories in major regions across China increased slightly by 700 mt from Monday to 139,900 mt, up 7,900 mt from Thursday last week, marking two consecutive weeks of inventory buildup. However, the inventory buildup this week was less than that of last week. On the demand side, copper prices fell yesterday, leading to better trading at lower prices. Currently, low-priced supplies have been largely purchased, and it is expected that the center of the premium will struggle to rebound today. In terms of price, with no more positive news in the market, it is expected that there will be limited upside room for copper prices today.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. 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.]

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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 should not rely on this information to replace their own independent judgment. Any decisions made by clients are unrelated to SMM.]