This week’s macro theme remained the intertwined expectations of US-Iran peace talks and geopolitical conflicts. At the start of the week, elevated ceasefire expectations (progress in Israel-Lebanon ceasefire, Trump’s comment that weekend negotiations with Iran might see progress) led to a pullback in oil prices and improved risk appetite, while production cuts in Chile, pending US copper cathode tariff rulings, and AI-driven demand supported copper prices near record highs with a firm center. Mid-week, the late-May PCE rose to a near three-year high, reinforcing the US Fed’s stance of keeping rates steady with the future path depending on inflation and employment; lingering differences between the US and Iran on nuclear issues and strait passage disrupted sentiment. By the end of the week, funds rotated out of semiconductors in US equities and oil prices weakened again, pulling copper prices back about 1.5% on profit-taking at highs and tariff uncertainty to around $13,700/mt on the LME. Overall, the US Fed remained on hold with sticky inflation, copper prices moved sideways near record highs, and macro drivers provided limited marginal upside momentum.
Fundamentals side, spot moved from weakness to stability. The weekly average discount for SMM #1 copper cathode was 52.98 yuan/mt, with the daily average discount steadily narrowing from a Tuesday low of 70 yuan/mt to 35 yuan/mt on Friday — the copper price pullback stimulated downstream consumption and a pickup in restocking interest, combined with a narrowing price spread between futures contracts as delivery approached, providing support to the futures market. However, high-quality copper supply remained tight, supply and demand in North China both declined, and overall trading was sluggish. Inventory-wise, unexpected destocking occurred this week, presenting a picture of narrowing spot discounts and a mild demand recovery, providing limited upward momentum for copper prices but some support to the downside.
Looking ahead to next week, the macro focus will remain on the May nonfarm payrolls, US-Iran negotiations, and S232 tariff rulings, with tariffs and geopolitics as the main disruptions. Fundamentals side, narrowing spot discounts and tight high-quality copper supply will provide support to the downside, but high copper prices will cap aggressive buying. LME copper is expected to trade in a range of $13,450–$13,850/mt, while SHFE copper is expected to trade at 104,300–106,800 yuan/mt, with sideways movement near highs. Spot premiums are expected to continue narrowing slightly with overall fluctuations; watch for downstream restocking strength after any futures pullback.
