Rising copper prices coupled with high premiums, downstream consumption is mainly driven by rigid demand [SMM Copper Morning Meeting Summary]

Futures market: LME copper opened at $9,871.5/mt overnight, fluctuated upward initially before plunging to $9,858.5/mt, then gradually rebounded to a high of $9,923/mt, finally closing at $9,898/mt, up 0.31%, with trading volume at 13,000 lots and open interest at 266,000 lots. The most-traded SHFE copper 2509 contract opened at 79,830 yuan/mt overnight, immediately hitting a high of 80,130 yuan/mt before retreating to 79,630 yuan/mt, then fluctuating upward to close at 79,970 yuan/mt, up 0.4%, with trading volume at 38,000 lots and open interest at 170,000 lots.

[SMM Copper Morning Briefing] News: (1) US President Trump announced via social media that the US and Japan reached a trade agreement: imposing 15% tariffs on Japanese imports and securing $550 billion in Japanese investment in the US. Trump posted on Truth Social: "We just made a massive deal with Japan, perhaps the biggest ever."

He stated in the post: Japan will open its markets for trade, including automobiles, trucks, rice and certain other agricultural products and commodities, and invest $550 billion in the US, with the US receiving 90% of the profits.

(2) Central bank data showed that by Q2 2025, outstanding RMB real estate loans stood at 53.33 trillion yuan, up 0.4% YoY, 0.6 percentage points higher than year-end 2024, with H1 increase of 416.6 billion yuan. Outstanding real estate development loans reached 13.81 trillion yuan by Q2 2025, up 0.3% YoY, with H1 increase of 292.6 billion yuan. Outstanding individual mortgage loans totaled 37.74 trillion yuan, down 0.1% YoY but 1.2 percentage points higher than year-end 2024, with H1 increase of 51 billion yuan.

Spot market: (1) Shanghai: On July 22, SMM #1 copper cathode spot prices against the front-month 2508 contract were at premiums of 160-320 yuan/mt, averaging 240 yuan/mt, up 20 yuan/mt MoM. Smelters replenished Shanghai inventories this week, but standard-quality and high-quality copper remained tight. The price spread is expected to stay wide today, with downstream buyers advised to make just-in-time procurement.

(2) Guangdong: On July 22, Guangdong #1 copper cathode spot prices against the front-month contract ranged from discounts of 50 yuan/mt to premiums of 30 yuan/mt, averaging a 10 yuan/mt discount, down 25 yuan/mt MoM. Overall, higher copper prices dampened consumption, with spot premiums continuing to decline amid muted trading activity.

(3) Imported copper: On July 22, warrant prices were $44-54/mt, QP August, average flat MoM; B/L prices were $56-76/mt, QP August, average flat MoM; EQ copper (CIF B/L) was $22-36/mt, QP July, average flat MoM, with offers referencing late-July and early-August arrivals. Overall, the widening LME contango structure reduced suppliers' willingness to sell, and the US dollar-denominated copper market remained sluggish before the import window opened significantly.

(4) Secondary copper: On July 22, the price of recycled copper raw materials rose 200 yuan/mt MoM, with bare bright copper in Guangdong quoted at 73,600-73,800 yuan/mt, up 200 yuan/mt from the previous trading day. The price difference between copper cathode and copper scrap stood at 1,286 yuan/mt, down 139 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 1,005 yuan/mt. According to the SMM survey, the midday closing price of copper futures was almost flat with the previous day. Although the futures market jumped initially and then pulled back in the morning session, many suppliers of recycled copper raw materials remained bullish on copper prices, leading to a 100 yuan/mt increase in morning offers compared to the previous day. Even after copper prices pulled back later, they did not adjust their prices, leaving many secondary copper rod enterprises struggling. The persistently high prices of recycled copper raw materials may only normalize when their supply increases substantially.

(5) Inventories: On July 22, LME copper cathode inventories rose 2,775 mt to 124,850 mt, while SHFE warrant inventories fell 2,670 mt to 25,507 mt.

Prices: On the macro front, US Treasury Secretary Besant stated that August 1 is a "relatively hard deadline" for all countries. US President Trump claimed Japan would pay a 15% reciprocal tariff, heightening market concerns over tariffs. He also asserted that "Powell will be out soon" and advocated for a 3-percentage-point rate cut, while US Fed Governor Bowman emphasized the need for monetary policy independence and maintaining transparency and accountability. The overnight US dollar index declined, supporting copper prices. On the fundamentals, smelters began replenishing supplies to Shanghai warehouses this week, but spot cargo remains tight. Demand side, downstream demand weakened due to the off-season and high copper prices. Overall, macro support and tight supply provided some downside support for copper prices.

[Data source statement: Except for publicly available information, other data are derived from public information, market exchanges, and SMM's internal database model, processed by SMM for reference only and not constituting decision-making advice.]

[The above information is based on market collection and comprehensive evaluation by the Shanghai Metals Market (SMM) research team. The information provided herein is for reference only. This article does not constitute direct investment research advice. Clients should exercise caution in decision-making and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]