Picking up from the previous article, the July market trend was in line with expectations. The price spread between SHFE copper 2607 and 2608 contracts evolved from a backwardation of 300 yuan/mt, building up until the last trading day of the 07 contract, reaching a high of over 600 yuan/mt during the session. After the market shifted to trading the SHFE copper 2608 contract, copper prices continued to rally and accelerated. The upward slope of the month-on-month backwardation increased significantly at the beginning of the month, and amidst high copper prices, the backwardation continued to rise in early August.
In August, the US tariff on copper are yet to take effect, and the price spread between copper markets in China and overseas continued to diverge. The COMEX-LME price spread persisted, while the LME-SHFE price spread showed signs of movement. At the end of July, China's copper cathode export window opened, and domestic smelters initiated export plans.
The tight supply pattern on the mine side continued. After domestic copper smelters concluded their concentrated maintenance period, they gradually resumed production. Combined with the ongoing release of new and expanded capacity in the industry, robust market demand for replenishment continuously suppressed copper concentrate spot TCs. As of August 21, 2026, SMM imported copper concentrate TCs were reported at -182.14 $/dmt, further squeezing smelter processing profits. Meanwhile, multiple negative factors, including the earlier concentrated maintenance at smelters, tight supply of copper scrap and anode plates, led to an unexpected pullback in China's copper cathode production in August. Driven by a supply-demand mismatch, China's social inventory of copper cathode continued to destock. The fundamentals for the copper market are currently improving overall, supporting both the strengthening of the backwardation structure and the high spot premiums.
Recently, spot premiums in the Shanghai area have remained high, with downstream maintaining just-in-time procurement. The overall copper cathode market is characterized by tight domestic supply, insufficient import replenishment, and continued social inventory destocking. As the delivery month approaches, spot premiums are expected to have room to rise further.
From the perspective of SHFE copper deliverable warrants, recent levels have been relatively low, and some deliverable cargoes are being prepared for export. The matching deliverable volume for the SHFE copper 2609 contract is expected to be limited, and the backwardation still has room to widen further. Currently, a backwardation within 150-250 yuan/mt is considered a safe position for rolling.
From the perspective of the warrant-to-inventory ratio, this indicator rebounded briefly recently, mainly due to the approach of the last trading day of the SHFE copper 2608 contract, prompting concentrated warrant registration in preparation for delivery. With the delivery of the 2608 contract, the warrant-to-inventory ratio has pulled back again. Caution is needed as this indicator may fall back to low levels again in mid-September, triggering structural fluctuations in the futures market.
In August, LME also experienced a widening of the backwardation. A high ratio of cancelled warrants led to a widening of the LME Cash-3M backwardation. After the LME August date ended, registered warrants were continuously issued, followed by another round of cancellations—a similar pattern to what occurs around SHFE delivery.
Observing the opening-day trends of the front-month contracts over the past four years, the last trading day of the SHFE copper August 2608 contract saw an intraday high of 1,100 yuan/mt and closed at 790 yuan/mt, the highest level in four years. Current fundamentals continue to support the widening of backwardation structure. Key factors to watch include: smelter export volumes, the impact from smelter maintenance, downstream order increases following a slight copper price correction, and copper scrap supply. Participants in the spot market should pay close attention to the triple pressure of high copper prices, high backwardation, and high premiums.
