Long-term contract negotiations for copper concentrates commence in mid-year, copper prices fluctuate rangebound in the short term [SMM Macro Weekly Review]

On the macro front, the auction results for 20-year US Treasury bonds were poor on Wednesday, and the 10-year US Treasury yield rose by over 11 basis points (BP) on Thursday. The market remains cautious about potential quantitative easing (QE) operations by the US Fed, with the US dollar index briefly returning above 100 before slipping again. In China, the marginal value-added of industrial production in April pulled back, while retail consumption increased slightly. Overall growth remained steady. On Wednesday, the People's Bank of China (PBOC) cut the 1-year and 5-year loan prime rates (LPR) by 0.1%, continuing to release domestic liquidity. This week, LME copper fluctuated rangebound near $9,500/mt, while SHFE copper also fluctuated rangebound below 78,000 yuan/mt.

On the fundamental front, Antofagasta initiated negotiations for long-term contracts for the second half of 2025 in Japan this week. Due to news of production cuts from overseas smelters, spot treatment charges (TC) for copper concentrates have stabilized in the short term. For copper cathode, with the LME Asia Metal Week held in Hong Kong, China this week, the spot market was sluggish. Outflows from LME Asia warehouses accelerated, and the market held a relatively pessimistic sentiment towards the premium of US dollar-denominated spot copper in late May. Domestically, after the delivery of the SHFE copper 2405 contract, spot premiums continued to decline, falling to around 100 yuan/mt in east China this week. Downstream restocking sentiment increased as prices dipped, with inventory stabilizing after pulling back.

Looking ahead to next week, with the release of liquidity both domestically and internationally, copper prices are expected to have strong support at the bottom. Before the conclusion of mid-year long-term contract negotiations, copper prices are likely to remain in a tug-of-war between sellers and buyers. It is expected that LME copper will fluctuate rangebound between $9,350-9,550/mt, while SHFE copper will fluctuate between 77,000-78,000 yuan/mt. On the spot front, with the temporary slowdown in domestic inventory buildup and strong downstream consumption support after a sharp decline in premiums, amid tight deliverable copper supplies, attention should be paid to the arrival of imported copper at customs and the tug-of-war between supply and demand for stockpiling ahead of the Dragon Boat Festival. Spot prices against the SHFE copper 2506 contract are expected to range from a premium of 100-250 yuan/mt.