Suddenly, international giants make a move! Will a large amount of Russian copper be shipped to China? Just now, oil prices soared

Trump said he believed that Iran wanted to reach an agreement, which would "save many lives," and that the agreement could be reached "within the next few weeks." Trump also expressed his desire to bring inspectors to Iran.

US Fed releases minutes of May interest rate-setting meeting

According to CCTV News, on May 28th local time, the US Fed released the minutes of the Federal Open Market Committee's meeting held from May 6th to 7th. The minutes showed that the Fed agreed to maintain the target range for the federal funds rate between 4.25% and 4.5%. Participants unanimously agreed that when considering the magnitude and timing of further adjustments to the target range for the federal funds rate, the Committee would carefully assess subsequent data, the changing economic outlook, and the balance of risks. The minutes stated that when assessing the appropriate stance of monetary policy, the Committee would continue to monitor the impact of future information on the economic outlook. Participants said that the assessment would take into account a wide range of information, including labour market conditions, inflationary pressures and inflation expectations, as well as financial and international developments.

The Committee assessed that uncertainty regarding the economic outlook had further increased. Participants pointed out that if inflation persists while the outlook for economic growth and employment weakens, the Committee may face difficult trade-offs. The final magnitude of adjustments to government policies and their impact on the economy remain highly uncertain. Against this backdrop, all participants agreed that it was appropriate to maintain the target range for the federal funds rate at 4.25% to 4.5%. When considering the outlook for monetary policy, participants unanimously believed that, given the continued resilience of economic growth and the labour market, the Committee was well-positioned to wait for greater clarity on the outlook for inflation and economic activity. It was appropriate to adopt a cautious approach until the net economic effects of a series of government policy adjustments became clearer.

Glencore makes significant purchases of Russian copper on the LME

On Tuesday, Bloomberg reported market news that over the past three trading days, the London Metal Exchange (LME) Rotterdam warehouse had received delivery requests for approximately 15,000 mt of copper, leading to a significant decline in LME copper inventories. The report stated that Glencore, a global commodity giant, was the main trader behind these cargo pick-up applications and was planning to ship the copper to China. Notably, a substantial amount of Russian copper was involved in the transactions.

It is understood that since the full-scale outbreak of the Russia-Ukraine conflict in 2022, escalating sanctions imposed by Europe and the US on Russia have led to a continuous accumulation of Russian copper inventories on the LME. In April 2024, the US and the UK announced new trading restrictions on Russian aluminum, copper, and nickel, including prohibiting the LME and the Chicago Mercantile Exchange (CME) from accepting newly produced Russian metals, while allowing eligible metal inventories.

What are the implications?

"After the US and the UK imposed sanctions on Russian copper in April 2024, Russian copper accounted for over 50% of the copper inventories in LME European warehouses, while China became one of the major export destinations for Russian copper following the sanctions," Zhang Weixin, a non-ferrous metals researcher at China Securities Futures, told reporters. After Russia and Ukraine resumed negotiations and proposed a ceasefire framework in May this year, Glencore may be betting on a relaxation of US and UK sanctions on Russia. Against the backdrop of warming spot demand in China, high premiums for imported copper, and the potential easing of US and UK sanctions on Russia, if Glencore resumes trading in Russian copper, it is expected to alleviate the "copper shortage" situation in the market.

The reporter learned that in March this year, US copper prices surged to $11,633/mt, with a premium over LME copper reaching as high as $1,570/mt. Gu Fengda, chief analyst at Guosen Futures, stated that the high premium for US copper directly spurred a frenzy of "trans-oceanic arbitrage" and attracted a continuous influx of global spot copper into the US, further exacerbating the supply-demand mismatch across regions. Currently, the premium for US copper over LME copper stands at $683/mt, still significantly higher than the historical average for the same period.

"With the favorable performance of copper fundamentals and the flow of some spot copper to the US, expectations of tight copper supply in markets outside the US continue to grow, which is also an important reason for Glencore's significant purchases of Russian copper this time."As spot liquidity tightens, LME copper's term structure may remain strong," said Xianfei Ji, a nonferrous metals researcher at Guotai Junan Futures.

Data shows that since late April, LME copper inventories have continued to decline. This week, the destocking pace of LME copper inventories accelerated further, currently pulling back to 154,300 mt, hitting new periodic lows. Meanwhile, LME copper registered warrant quantities declined in tandem, now retreating to 83,125 mt. Cancelled warrants stood at 71,175 mt, with the ratio of cancelled warrants at 46.13%, remaining at elevated levels.

Domestically, Weixin Zhang noted that due to the US "Section 232 investigation" on critical minerals, global commodity trading giants have diverted copper originally destined for Asia to the US, even relabeling Chilean Antofagasta copper ingots with US standards. This caused delays or cancellations of China's imported copper long-term contracts scheduled for April and May arrivals, driving up spot copper premiums in China and creating tight spot supply conditions.

"Glencore's potential import activities could help alleviate China's copper supply tightness," said Yunfei Wang, head of the investment consulting department at ShanJin Futures. Currently, global copper cathode inventories are at median historical levels, while domestic copper inventories remain at historic lows. From price spread performance, the US copper premium over LME copper remains high, but with intensified price volatility, market divergence is gradually emerging.

Policy-wise, after the US "reciprocal tariff" policy implementation was postponed, the market expected accelerated US copper scrap exports and increased raw material supply. However, domestic TC prices show no signs of raw material supply improvement yet. Inventory-wise, as of the week ending May 28, the US copper inventory buildup trend paused, while domestic social inventory also showed stabilization signs. Overall, Wang believes the US copper "arbitrage wave" may reverse at some point, creating downside potential for copper prices, though no reversal signals have appeared yet.

Ji noted investors should closely monitor whether Trump will impose 25% additional tariffs on imported copper. If tariff hike expectations keep getting priced in, it may sustain high price spreads between US and LME copper, with South American and other regional supplies continuously diverted to the US, leaving other regions persistently undersupplied.

"Short-term, under current spread structures, changed global copper trade flows seem only a matter of time," Wang stated. Medium and long-term, the copper market's focus remains on copper ore supply conditions and demand outlook.