LME inventories continue to decline, with the ratio of cancelled warrants approaching half [SMM Copper Morning Meeting Summary]

Futures Market: Overnight, LME copper opened at $9,636.5/mt. It initially touched a high of $9,645.0/mt before fluctuating downward. The price hit a low of $9,548.0/mt at the end of the session and eventually closed at $9,566.0/mt, down 0.31%. Trading volume was 14,383 lots, and open interest was 293,958 lots. Overnight, the SHFE copper 2507 contract opened at 78,010 yuan/mt. The price fluctuated initially, then declined steadily. It touched a high of 78,130 yuan/mt at the beginning of the session and a low of 77,700 yuan/mt at the end, eventually closing at 77,790 yuan/mt, down 0.33%. Trading volume was 26,397 lots, and open interest was 168,556 lots.
[SMM Copper Morning Meeting Summary] News: (1) On May 28 (Wednesday), Kazakh metals producer KAZ Minerals stated in a release that its copper production in the first quarter of this year was 90,400 mt, a 4.1% decrease year-on-year. The company attributed the decline in Q1 copper production to lower ore grades, but its Q1 copper production was still slightly higher than the 92,900 mt in Q4 2024.
(2) The latest data released by the LME showed that LME copper cancelled warrants rebounded from a low level but slipped to 71,175 mt today, with the proportion of cancelled warrants at 46.13%. Registered warrants have been declining smoothly recently, currently at 83,125 mt. Since late April, the destocking of LME copper has been relatively smooth, and the destocking speed has accelerated this week, currently at 154,300 mt, continuing to refresh the phased low. Registered warrants have declined simultaneously, and the proportion of cancelled warrants, which had previously fallen, has recently risen again and remains at a relatively high level.
Spot Market: (1) Shanghai: On May 28, SMM #1 copper cathode spot premiums against the front-month 2506 contract were reported at 100-200 yuan/mt, with an average premium of 150 yuan/mt, unchanged from the previous trading day. The SMM #1 copper cathode price was 78,430-78,590 yuan/mt. In the morning session, SHFE copper moved downwards after a higher opening, initially opening at 78,480 yuan/mt and then declining in a stepped manner, mainly fluctuating around 78,300-78,400 yuan/mt. As the Dragon Boat Festival approaches, procurement in the spot market has not shown a pre-holiday stockpiling sentiment, but a large amount of imported copper continues to arrive, basically filling downstream demand. It is expected that spot premiums will remain stable tomorrow.
(2) Guangdong: On May 28, Guangdong #1 copper cathode spot premiums against the front-month contract were reported at 80-160 yuan/mt, with an average premium of 120 yuan/mt, down 100 yuan/mt from the previous trading day. SX-EW copper premiums were reported at 20-40 yuan/mt, with an average premium of 30 yuan/mt, down 100 yuan/mt from the previous trading day. The average price of Guangdong #1 copper cathode was 78,515 yuan/mt, down 45 yuan/mt from the previous trading day, and the average price of SX-EW copper was 78,425 yuan/mt, down 45 yuan/mt from the previous trading day. Overall, as the month-end approaches, suppliers are actively reducing prices to sell, and spot premiums have fallen sharply.
(3) Imported Copper: On May 28, the warrant price for imported copper was between $82 and $96/mt today, with QP June, and the average price fell by $5/mt from the previous trading day. The B/L price was between $90 and $122/mt, with QP June, and the average price fell by $3/mt from the previous trading day. The EQ copper (CIF B/L) price was between $64 and $76/mt, with QP June, and the average price fell by $7/mt from the previous trading day. The quotes referenced cargoes arriving in early June. Overall, market transactions weakened. Note that due to rumors about the cancellation of Russian copper, the LME backwardation structure expanded. Meanwhile, export profits have reached the smelter's export profit threshold, and attention should be paid to short-term inventory changes in bonded areas.
(4) Secondary Copper: On May 28, the price of secondary copper raw materials remained unchanged MoM. The price of bare bright copper in Guangdong was between 72,700 and 72,900 yuan/mt, unchanged from the previous trading day. The price difference between copper cathode and copper scrap was 943 yuan/mt, unchanged MoM. The price difference between copper cathode rod and secondary copper rod was 1,130 yuan/mt. According to the SMM survey, copper prices remained almost unchanged for three consecutive trading days. Many suppliers of secondary copper raw materials were concerned about a potential drop in copper prices around the holiday, so to recoup funds, they were actively selling today. Secondary copper rod enterprises reported a significant improvement in raw material procurement compared to the previous two days.
(5) Inventory: On May 28, LME copper cathode inventory decreased by 7,850 mt to 154,300 mt. On May 27, SHFE warrant inventory decreased by 100 mt to 34,861 mt.
Price: On the macro side, the US Fed meeting minutes indicated that the risks of rising unemployment and inflation had increased, and the benefits of flexible average inflation targeting in a high-risk environment had diminished. However, the market was optimistic that trade agreements would improve the US economic outlook. Meanwhile, the weakening of the Japanese yen pushed the US dollar index to rise continuously, suppressing copper prices. On the fundamental side, copper prices remained high, and downstream consumption sentiment weakened. No pre-holiday inventory replenishment orders were observed ahead of the Dragon Boat Festival, while imported copper continued to arrive. Overall, the US dollar index surged, suppressing copper prices. However, copper inventories in LME-registered warehouses have fallen to their lowest level in nearly a year. It is expected that copper prices will stop falling and stabilize today.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions cautiously and not rely on this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]