US non-farm payrolls data exceeds expectations, LME copper pulls back slightly from highs [SMM Copper Morning Meeting Summary]

Futures Market: Overnight LME copper opened at $9,997/mt, initially touched $10,013/mt before plunging sharply, then rebounded to highs and continued declining toward the session close, bottoming at $9,937/mt and finally settling at $9,951.5/mt with a 0.58% loss. Trading volume reached 13,000 lots and open interest stood at 282,000 lots. The most-traded SHFE copper 2508 contract opened and bottomed at 80,460 yuan/mt, then dipped to 80,370 yuan/mt before rallying to 80,760 yuan/mt. Prices fluctuated downward intraday but recovered slightly at the close, ending at 80,540 yuan/mt with a 0.27% loss. Trading volume reached 28,000 lots and open interest stood at 223,000 lots.
[SMM Copper Morning Meeting Summary] News: (1) US June data showed 147,000 jobs added, with unemployment rate pulling back slightly to 4.1% (vs expected 4.3% and prior 4.2%), reinforcing market expectations for the US Fed to maintain rates unchanged at least through autumn. Post-data release, US Treasury yields rose and the US dollar strengthened. The two-year Treasury yield surged to a near two-week high, with rate swap markets virtually ruling out pre-September rate cuts.
Spot Market: (1) Shanghai: On July 3, SMM #1 copper cathode spot premiums against the front-month 2507 contract were reported at 70-160 yuan/mt, averaging 115 yuan/mt (down 5 yuan/mt from the previous session). SMM #1 copper cathode prices stood at 80,870-81,090 yuan/mt. The SHFE copper 2507 contract slid from above 81,000 yuan/mt in early trading as longs reduced positions, dropping to 80,760 yuan/mt before recovering to around 80,900 yuan/mt. The backwardation spread between nearby contracts fluctuated between 210-250 yuan/mt. As it was Friday, downstream procurement sentiment remained subdued amid high copper prices. Market supply was adequate despite imported arrivals, with expected trading volumes similar to today's level.
(2) Guangdong: July 3 spot premiums for Guangdong #1 copper cathode against the front-month contract were 30-100 yuan/mt (average 65 yuan/mt, down 20 yuan/mt from previous session). SX-EW copper was quoted at discounts of 30-10 yuan/mt (average -20 yuan/mt, down 20 yuan/mt). Guangdong #1 copper cathode averaged 80,965 yuan/mt (up 70 yuan/mt), while SX-EW copper averaged 80,880 yuan/mt (up 70 yuan/mt). Overall, high copper prices kept downstream buyers cautious, with spot premiums continuously weakening.
(3) Imported Copper: July 3 warrant prices stood at $20-40/mt (July QP), unchanged from previous session. B/L prices reached $32-66/mt (August QP, up $1/mt average). EQ copper (CIF B/L) premiums ranged from -$11 to $5/mt (August QP, unchanged average), with pricing referencing mid-to-late July arrival cargoes.
(4) Secondary copper: On July 3, secondary copper raw material prices rose 400 yuan/mt WoW. Guangdong bare bright copper prices stood at 74,200-74,400 yuan/mt, up 400 yuan/mt from the previous trading day. The price difference between copper cathode and copper scrap narrowed to 1,982 yuan/mt, down 421 yuan/mt WoW. The price difference between copper cathode rod and secondary copper rod was 1,610 yuan/mt. According to SMM survey findings regarding "reverse invoicing" implementation, Anhui and Hubei provinces have fully enforced the policy. Some enterprises reported that secondary copper rod producers need time to adapt after full policy implementation and must gradually complete upstream procurement procedures, which may temporarily suspend production until raw material sourcing processes are streamlined.
(5) Inventories: On July 3, LME copper cathode inventory increased 1,075 mt to 93,250 mt; SHFE warrant inventory decreased 994 mt to 24,103 mt on the same day.
Prices: Macro drivers - US Labor Department data released Thursday showed 147,000 nonfarm payroll additions in June, significantly reducing expectations for US Fed interest rate cuts and strengthening the US dollar, creating bearish pressure on copper prices. Meanwhile, US Treasury Secretary Bessent warned against extending trade negotiations, threatening tariff rollbacks to April 2 levels if no progress occurs, heightening market concerns. Fundamentals - Supply side: As of Friday, imported material arrivals entered the market without causing tightness. Demand side: Downstream procurement sentiment remained weak amid elevated copper prices. As of Thursday, July 3, SMM national copper inventories across major regions increased 5,700 mt from Monday to 131,800 mt, up 1,700 mt WoW from Thursday. Weekly inventories first declined then rebounded, standing 278,000 mt lower than the 409,800 mt YoY level. Price pressures persist due to US House passage of Trump's tax cuts and spending bill, which could exacerbate inflationary pressures amid strong economic signals like the latest jobs report. Consequently, significant overhead pressure is expected for copper prices today.
[The provided information is for reference only and does not constitute direct investment research advice. Clients should exercise independent judgment, and any decisions made shall not be attributed to SMM.]