US CPI data raises expectations for an interest rate cut in September; LME copper closes slightly higher overnight [SMM Copper Morning Meeting Summary]

Futures: Overnight, LME copper opened at $9,768.5/mt, touched a low of $9,747.5/mt at the beginning of the session, then fluctuated upward throughout the day, nearing a high of $9,865/mt before closing at $9,840/mt, up 1.17%. Trading volume reached 18,000 lots, while open interest stood at 266,000 lots. Overnight, the most-traded SHFE copper 2509 contract opened and touched a low of 79,220 yuan/mt, then fluctuated upward, nearing a high of 79,510 yuan/mt before closing at 79,410 yuan/mt, up 0.6%. Trading volume reached 23,000 lots, while open interest stood at 158,000 lots.

[SMM Copper Morning Meeting Summary] News: (1) On August 11, Western Mining Co., Ltd. stated on the investor interaction platform that the Yulong copper mine is currently in the open-pit mining stage, with no deep drilling or exploration work conducted yet. The third-phase project of Yulong copper mine is expected to obtain relevant permits and meet construction conditions by the end of 2025.

Spot: (1) Shanghai: On August 12, SMM #1 copper cathode spot prices against the front-month 2508 contract were quoted at premiums of 140-260 yuan/mt, with an average premium of 200 yuan/mt, up 50 yuan/mt from the previous trading day. SMM #1 copper cathode prices ranged from 79,070 to 79,230 yuan/mt. In the morning session, SHFE copper prices rose continuously from 78,870 yuan/mt, repeatedly touching 78,980 yuan/mt. The contango structure between nearby months persisted, fluctuating between C30 and C10. Domestic arrivals replenished supply, limiting further upside for premiums. However, as suppliers' recent purchase costs remained high, their willingness to sell at lower prices is expected to decrease. Additionally, under the current contango structure, suppliers are reluctant to sell at discounts and show low delivery intentions.

Guangdong: On August 12, Guangdong #1 copper cathode spot prices against the front-month contract ranged from a discount of 20 yuan/mt to a premium of 40 yuan/mt, with an average premium of 10 yuan/mt, up 30 yuan/mt from the previous trading day. SX-EW copper was quoted at discounts of 90-70 yuan/mt, with an average discount of 80 yuan/mt, up 30 yuan/mt from the previous day. The average price of Guangdong #1 copper cathode was 78,935 yuan/mt, down 15 yuan/mt from the previous day, while SX-EW copper averaged 78,845 yuan/mt, down 15 yuan/mt. Overall, suppliers continued to actively refuse to budge on prices, pushing spot premiums higher, with trading activity improving compared to the previous day.

(3) Imported copper: On August 12, warrant prices ranged from $40/mt to $54/mt, QP August, with the average up $2/mt from the previous trading day. B/L prices ranged from $48/mt to $60/mt, QP September, with the average down $1/mt from the previous day. EQ copper (CIF B/L) was quoted at $20/mt to $32/mt, QP September, with the average unchanged from the previous day. Offers referenced cargoes arriving in mid-to-late August and early September. Overall, market offers pulled back near the transaction range, with buyers and sellers moving toward equilibrium, and substantial spot cargo transactions occurred during the day.

(4) Secondary copper: On August 12, the price of recycled copper raw materials remained flat MoM. The price of bare bright copper in Guangdong was 73,300-73,500 yuan/mt, unchanged from the previous trading day. The price difference between copper cathode and copper scrap was 1,065 yuan/mt, down 10 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 755 yuan/mt. According to an SMM survey, some secondary copper rod enterprises indicated they might consider suspending production amid policy uncertainties, resuming only after government policies are clarified. Additionally, varying tax requirements across regions have caused procurement challenges for many secondary copper rod enterprises, though most currently rely on the "reverse invoicing" method.

(5) Inventory: On August 12, LME copper cathode inventories decreased by 700 mt to 155,700 mt, while SHFE warrant inventories increased by 3,021 mt to 26,296 mt.

Prices: Macro-wise, the US unadjusted CPI YoY for July remained flat at 2.7% MoM, while the unadjusted core CPI YoY rose to a five-month high of 3.1%. Following the data release, traders increased bets on a US Fed interest rate cut in September. Trump urged Powell to cut rates immediately, and US Treasury Secretary Besant suggested the Fed consider a 50-basis-point cut in September. The US dollar index declined, boosting copper prices. On the supply side, domestic supply remained limited, with some smelters reluctant to sell, tightening spot market availability. Demand side, copper prices dropped slightly during the day, with downstream buyers maintaining just-in-time procurement. Price-wise, the latest US inflation data bolstered expectations of a Fed rate cut, supporting copper prices at the bottom today.

[The information provided is for reference only. This article does not constitute direct investment advice. Clients should exercise caution and avoid relying solely on this content for independent decision-making. Any decisions made by clients are unrelated to SMM.]