U.S. Government Shutdown Continues, Overnight Copper Prices First Fell Then Rose [SMM Copper Morning Meeting Minutes]

Futures: LME copper opened at $10,941.5/mt overnight, initially touched a low of $10,935/mt, then the price center rose all the way to a high of $11,048/mt, finally consolidated sideways and closed at $11,029.5/mt, a gain of 0.26%, with trading volume reaching 22,000 lots and open interest reaching 323,000 lots. The most-traded SHFE copper contract 2512 opened and touched a low of 87,220 yuan/mt overnight, then the price center rose all the way, approaching the tail end to touch a high of 88,120 yuan/mt, finally closing at 87,910 yuan/mt, a gain of 0.25%, with trading volume reaching 81,000 lots and open interest reaching 283,000 lots.

[SMM Copper Morning Meeting Minutes] News:

(1) On Wednesday, October 29, Southern Copper, one of Peru's largest copper producers, stated that its $1.8 billion Tia Maria mine project is 23% complete and maintains the target for commissioning in 2027 unchanged. The project is expected to produce 120,000 mt of copper cathode annually.

Spot:

(1) Shanghai: On October 28, SMM #1 copper cathode spot prices against the front-month 2511 contract were at a discount of 120 yuan/mt to a premium of 10 yuan/mt, with the average price quoted at a discount of 55 yuan/mt, down 10 yuan/mt from the previous trading day; SMM #1 copper cathode prices were 87,620-88,190 yuan/mt. The SHFE copper 2511 contract briefly surged to 88,260 yuan/mt in the morning session before starting to fall, plummeting sharply to 87,720 yuan/mt around 11 a.m., then fell straight to around 87,420 yuan/mt near the morning close. The inter-month price spread was between C50 – C20 yuan/mt, and the import arbitrage loss for SHFE front-month copper was nearly 1,000 yuan/mt. Looking ahead to today, copper prices experienced a slight pullback, improving market procurement sentiment, but just-in-time procurement remains the main strategy currently. Low-priced cargoes attracted traders to stockpile, and spot discounts for SHFE copper are expected to have limited room for decline tomorrow.

(2) Guangdong: On October 28, Guangdong #1 copper cathode spot prices against the front-month contract were at a discount of 30 yuan/mt to a premium of 30 yuan/mt, with the average premium at 0 yuan/mt, flat from the previous trading day; SX-EW copper was quoted at a discount of 100 yuan/mt to a discount of 60 yuan/mt, with the average discount at 80 yuan/mt, up 30 yuan/mt from the previous trading day. The average price of Guangdong #1 copper cathode was 88,140 yuan/mt, flat from the previous trading day, while the average price of SX-EW copper was 88,060 yuan/mt, up 30 yuan/mt from the previous trading day. Overall, both inventory and copper prices pulled back, suppliers refused to budge on prices but actual transactions remained poor, with overall trading weak.

(3) Imported copper: On October 28, warrant prices were $30-40/mt, QP November, the average price was flat from the previous trading day; B/L prices were $42-64/mt, QP November, the average price was flat from the previous trading day; EQ copper (CIF B/L) was at -$14/mt to $0/mt, QP November, the average price fell $2/mt from the previous trading day. Quotations refer to cargoes arriving in late October and early November.

(4) Secondary Copper: On October 28, the price of recycled copper raw materials fell 100 yuan/mt MoM. The price of bare bright copper in Guangdong was 78,700-78,900 yuan/mt, down 100 yuan/mt from the previous trading day. The price difference between copper cathode and copper scrap was 3,975 yuan/mt, down 404 yuan/mt MoM. The price difference between copper cathode rod and secondary copper rod was 1,710 yuan/mt. According to the SMM survey, as copper prices continued to decline in the afternoon, secondary copper rod enterprises received more and more orders from traders of recycled copper raw materials. Many secondary copper rod enterprises reported that daily raw material procurement reached 800-1,000 mt, some of which were short orders. Secondary copper rod enterprises indicated that at the initial stage of the copper price correction, raw material procurement would be relatively cautious, and they would consider restocking after prices stabilized.

(5) Inventories: On October 27, LME copper cathode inventories decreased 1,400 mt to 134,575 mt; on October 28, SHFE warrant inventories increased 454 mt to 35,846 mt.

Prices: On the macro front, the US government shutdown continued, increasing market uncertainty and putting the US dollar under pressure, which supported copper prices. ADP released its weekly estimate of the US National Employment Report, showing signs of recovery in the US job market in October. The market is currently widely focused on the US Fed interest rate decision early Thursday.

On the fundamental side, supply side, high-quality copper and SX-EW copper were in short supply, and overall supply was tight. Demand side, although copper prices slightly corrected, market procurement sentiment rebounded limitedly, and just-in-time procurement remained the main approach. Overall, supported by optimistic expectations for US Fed interest rate cuts, copper prices are expected to have support today.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions cautiously and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]