US PPI increased significantly MoM, putting pressure on copper prices. Zambia's copper production in H1 fell short of expectations [SMM Copper Morning Meeting Summary]

Futures: Overnight, LME copper opened at $9,775.5/mt, initially plunged straight to a low of $9,714/mt, then fluctuated considerably upward, touching a high of $9,780/mt near the close, and finally settled at $9,777/mt with a 0% change. Trading volume reached 15,000 lots, and open interest stood at 269,000 lots. Overnight, the most-traded SHFE copper 2509 contract opened at 78,760 yuan/mt, initially touched a high of 78,960 yuan/mt, then saw its center shift downward to a low of 78,740 yuan/mt before rebounding in a "V"-shaped pattern toward the close, ultimately settling at 78,940 yuan/mt, down 0.23%. Trading volume was 18,000 lots, and open interest totaled 152,000 lots.

[SMM Copper Morning Briefing] News: (1) On Thursday, August 14, official data showed Zambia's Q2 copper production declined, jeopardizing its annual target of raising output to 1 million mt. President Hakainde Hichilema's administration has been striving to boost copper production to steer Zambia's economy back on track after a prolonged debt crisis. The government reported Q1 2025 copper production at approximately 224,000 mt. Mining Minister Paul Kabuswe stated at a press conference that output in the first half of the year totaled 439,644 mt.

Spot: (1) Shanghai: On August 14, SMM #1 copper cathode spot prices against the front-month 2508 contract were at premiums of 140-280 yuan/mt, averaging 210 yuan/mt, up 10 yuan/mt from the previous day. SMM #1 copper cathode prices ranged between 79,320-79,550 yuan/mt. In early trading, the SHFE copper 2508 contract jumped initially and then pulled back, briefly touching 79,330 yuan/mt from around 79,200 yuan/mt before retreating to 79,110 yuan/mt. Approaching delivery, the price spread between futures contracts narrowed toward parity, fluctuating between a discount of 10 yuan/mt and a premium of 10 yuan/mt during the morning session. Today marked the last trading day for the SHFE copper 2508 contract, with suppliers expected to reduce selling sentiment. However, as it was Friday, some downstream users had just-in-time procurement needs, keeping spot premiums firm.

(2) Guangdong: On August 14, Guangdong #1 copper cathode spot prices against the front-month contract ranged from a premium of 30 yuan/mt to 90 yuan/mt, averaging 60 yuan/mt, up 35 yuan/mt from the previous day. SX-EW copper traded at discounts of 40-20 yuan/mt, averaging a 30 yuan/mt discount, up 30 yuan/mt day-on-day. The average price of Guangdong #1 copper cathode was 79,305 yuan/mt, down 10 yuan/mt, while SX-EW copper averaged 79,215 yuan/mt, down 15 yuan/mt. Overall, increased downstream consumption and lower inventories drove spot premiums higher, with overall trading activity outperforming the previous day.

(3) Imported copper: On August 14, warrant prices were $40-54/mt, QP August, averaging flat day-on-day; B/L prices were $48-60/mt, QP September, also averaging flat. EQ copper (CIF B/L) was quoted at $20-30/mt, QP September, averaging down $1/mt. Offers referenced cargoes arriving in mid-to-late August and early September. Overall, the market remains optimistic about the SHFE/LME price ratio in September, as domestic consumption remains robust, with a potential trend of import arbitrage opportunities opening up.

(4) Secondary copper: On August 14, the price of recycled copper raw materials dropped 100 yuan/mt MoM, with bare bright copper in Guangdong quoted at 73,400-73,600 yuan/mt, down 100 yuan/mt from the previous trading day. The price difference between copper cathode and copper scrap narrowed 53 yuan/mt MoM to 1,129 yuan/mt, while the price difference between copper cathode rod and secondary copper rod stood at 830 yuan/mt. According to an SMM survey, some secondary copper rod enterprises have temporarily suspended production pending clarification of relevant policies. If the "subsidy" policy is indeed abolished, these enterprises will only procure recycled copper raw materials with 13% VAT to offset input and output taxes; otherwise, they would bear an additional 8.5% tax burden.

(5) Inventory: On August 14, LME copper cathode inventories decreased 25 mt to 155,850 mt, while SHFE warrant inventories rose 1,634 mt to 24,434 mt.

Prices: Macro-wise, the US July PPI MoM surged 0.9%, marking the largest increase since 2022 and signaling broader inflationary pressures in the coming months. Following the data release, US Fed officials pushed back against expectations of a significant interest rate cut in September, driving the US dollar index higher and weighing on copper prices. On the supply side, although imported copper arrivals supplemented the market, domestic supply remained tight. Imported copper arrivals are expected to increase further next week, potentially improving the supply structure. Demand side, recovery momentum emerged as downstream demand gradually rebounded in late August, driving weekly inventory declines. Data showed that as of Thursday, August 14, SMM's mainstream copper inventories across China fell 6,000 mt from Monday to 125,600 mt, down 6,400 mt WoW from the previous Thursday. Price-wise, copper prices were expected to fluctuate rangebound as Trump and Putin were scheduled to meet today to discuss the Russia-Ukraine conflict.

[The information provided is for reference only. This article does not constitute direct investment advice. Clients should exercise caution and avoid using it as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]