Copper prices encounter resistance amid loose supply and weakening demand [SMM Copper Morning Meeting Summary]

Futures: Overnight, LME copper opened at $9,669.5/mt, initially climbed to $9,683/mt, then gradually declined to hit bottom at $9,627/mt before rebounding to close at $9,634.5/mt, down 0.76%, with trading volume at 18,000 lots and open interest at 265,000 lots. Overnight, the most-traded SHFE copper 2509 contract opened at 78,170 yuan/mt, touched a high of 78,210 yuan/mt, then gradually retreated to 78,050 yuan/mt before consolidating to close at 78,070 yuan/mt, down 0.52%, with trading volume at 29,000 lots and open interest at 160,000 lots.

[SMM Copper Morning Briefing] News: (1) The US Fed held rates steady at its July meeting, but subsequent weak employment data quickly shifted the narrative, prompting officials to implement an aggressive 50-bp interest rate cut as a "remedial" measure at the September meeting. A similar scenario now appears to be unfolding, with markets closely watching whether the Fed will "repeat the playbook." Expectations for a significant rate cut are currently rising. According to Wind Trading Desk, Citi's August 1 research report projected a 25-bp Fed rate cut in September, but noted that the likelihood of a 50-bp cut would increase significantly if August employment data also disappoints.

(2) The China Chamber of Commerce for Import and Export of Machinery and Electronic Products issued an initiative to PV enterprises: First, strictly adhere to fair competition principles and conduct operations in compliance with laws and regulations; Second, reasonably control capacity expansion pace based on global demand and orderly phase out outdated capacity; Third, focus on technological innovation and quality improvement to shift PV products from "scale advantage" to "quality advantage"; Fourth, strengthen self-discipline awareness and jointly abide by the "Self-Discipline Convention for Foreign Trade Enterprises in the PV Industry."

Spot: (1) Shanghai: On August 5, SMM #1 copper cathode spot prices against the front-month 2508 contract were at a premium of 80-180 yuan/mt, averaging 130 yuan/mt, down 50 yuan/mt MoM. Looking ahead, copper prices above 78,500 yuan/mt will inevitably pressure downstream procurement. With increasing non-registered spot supply in the market and downstream buyers favoring low-priced cargoes, premiums are expected to decline further today.

(2) Guangdong: On August 5, Guangdong #1 copper cathode spot prices against the front-month contract ranged from a discount of 110 yuan/mt to parity, averaging a 55 yuan/mt discount, flat MoM. Overall, suppliers slightly raised premiums but actual transactions were lackluster, with market attention turning to future arrivals.

(3) Imported copper: On August 5, warrant prices were $44-56/mt, QP August, averaging $1/mt lower MoM; B/L prices were $54-66/mt, QP August, flat MoM; EQ copper (CIF B/L) was $20-30/mt, QP August, flat MoM, with quotes referencing mid-to-early August arrival cargoes. Overall, offers showed a clear upward trend, but buyers were temporarily reluctant to accept them.

(4) Secondary copper: At 11:30 on August 5, the futures closing price was 78,470 yuan/mt, down 210 yuan/mt from the previous trading day. The average spot premiums/discounts stood at 130 yuan/mt, down 50 yuan/mt from the previous trading day. Today, recycled copper raw materials prices rose 100 yuan/mt MoM. Bare bright copper prices in Guangdong were 73,000-73,200 yuan/mt, up 100 yuan/mt from the previous trading day. The price difference between copper cathode and copper scrap was 834 yuan/mt, up 54 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 690 yuan/mt. According to the SMM survey, many secondary copper rod enterprises reported that recycled copper raw materials prices moved in line with copper prices, significantly increasing procurement pressure for many enterprises. The narrow price difference between copper cathode and copper scrap persisted due to the prolonged tight supply of recycled copper raw materials, preventing the spread from narrowing.

(5) Inventory: On August 4, LME copper cathode inventories increased by 14,275 mt to 153,850 mt. On August 5, SHFE warrant inventories decreased by 1,581 mt to 18,767 mt.

Prices: Macro side, Trump announced new tariffs targeting pharmaceuticals and chips, with pharmaceutical tariffs potentially reaching up to 250%, and a sharp increase in tariffs on India within 24 hours. He also threatened to impose 35% tariffs on the EU. These tariff threats triggered market risk-off sentiment, putting downward pressure on copper prices. Additionally, Trump stated he might soon announce the new US Fed Chairman nominee, while current Treasury Secretary Besant hopes to remain, with related uncertainties further exacerbating market volatility. Fundamental side, supply of high-grade, high-quality copper remained tight, but imported copper arrivals supplemented the market, increasing availability of non-registered brands. Demand side remained weak due to the off-season and high copper prices. The overall fundamentals showed loose supply and weakening demand. In summary, copper prices were expected to encounter resistance today.

[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 do not constitute decision-making advice.]

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