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Source: Huatai Futures Author: Shi Cheng Market Highlights and Key Data Futures Market: On 2026-02-02, the main Shanghai copper contract opened at 104,200 yuan/ton and closed at 98,580 yuan/ton, down 4.92% from the previous trading day's close. During yesterday's night session, the main Shanghai copper contract opened at 101,490 yuan/ton and closed at 100,820 yuan/ton, a decrease of 1.01% from the afternoon session's closing price. Spot Market Conditions: According to an SMM report, yesterday, the spot price of SMM #1 electrolytic copper against the 2602 contract was quoted at a discount of 180 to 80 yuan/ton, with an average discount of 130 yuan, an increase of 20 yuan. The spot price range was 99,880-101,040 yuan/ton. The copper futures price probed a low of 99,500 yuan in the early session before fluctuating between 99,900 and 101,160 yuan, ultimately closing at 99,960 yuan. The contango spread between nearby months was 320-160 yuan, while import losses stood at 410-260 yuan. In the morning, holders were cautious in their offers, with premium brands like Guixi quoted at discounts of 100 yuan to premiums of 50 yuan, and standard-grade copper at discounts of 180-100 yuan. Subsequently, prices were adjusted downward, with premium brands quoted at discounts of 100-50 yuan and standard-grade copper at discounts of 150-120 yuan. Offers continued to weaken in the afternoon; Lufang was quoted at a discount of 140 yuan, while brands like Jinguan were quoted at discounts of 200-180 yuan. Wet-process copper, due to tight supply, was quoted at a discount of 220 yuan, and non-registered copper traded at a discount of 320 yuan. Companies reported that the decline in copper prices today significantly stimulated end-user orders, with some firms seeing order volumes increase by up to 60%. It is expected that spot prices will remain under pressure, but the current price level offers some attractiveness for procurement. The opening of the import arbitrage window may increase future supply; if copper prices fall further, it could trigger sustained inventory replenishment, supporting a gradual stabilization of the discount. Summary of Key Information: Macroeconomic and Geopolitical Aspects: Iranian President Pezeshkian ordered the initiation of nuclear negotiations with the United States, and high-level talks between Iran and the US may occur in the coming days. Sources indicated that US Special Envoy Witkoff and Iranian Foreign Minister Araghchi are expected to meet on February 6 in Istanbul, Turkey, to discuss a "potential nuclear agreement." Additionally, Russian Presidential Press Secretary Peskov confirmed that the next round of negotiations on the Ukraine issue will take place in Abu Dhabi on February 4-5 local time. In other news, US President Trump plans to launch a strategic critical minerals reserve program named "Project Vault," with an initial funding scale of $12 billion, aimed at protecting US manufacturers from supply shocks. Mining Sector: Foreign news on February 2 reported that Canadian mining company Capstone Copper announced on Monday that its Mantoverde copper-gold mine in northern Chile has resumed operations, despite an ongoing strike by a union representing nearly 22% of its workforce. In a filing with the Australian exchange on February 1, the company reiterated that it expects operational capacity during the strike to be maintained at 50% to 75% of normal production levels. The decision to restart operations was based on a ruling by a Chilean court last week, which authorized the forced removal of striking workers from the desalination plant supplying water to the mine. The strike, which began in January, persists as union employees rejected Capstone's latest wage proposal, escalating the dispute. In 2025, the Mantoverde mine produced 62,308 tons of copper concentrate and 32,807 tons of cathode copper, accounting for approximately 0.4% of global copper production. Smelting and Imports: On February 2, data released by the London Metal Exchange (LME) showed that LME copper inventories continued to rise overall last week. Inventories reached a new high of over eight months at 176,075 tons on January 29, before slightly declining to the latest level of 174,975 tons. The latest data from the Shanghai Futures Exchange revealed that during the week of January 30, Shanghai copper inventories continued to accumulate, increasing by 3.13% week-on-week to 233,004 tons, reaching a near ten-month high. International copper inventories decreased by 101 tons to 15,794 tons. Last week, COMEX copper inventories continued to accumulate, with the latest level reaching 577,724 tons, setting another new high for the period. Consumption Aspect: In January 2026, end-consumption of copper products exhibited a characteristic of pre-holiday front-loading, but specific sectors showed divergence. In the power sector, State Grid orders provided core support, with periodic inventory replenishment releasing rigid demand; however, orders from the engineering segment remained persistently weak, and demand related to real estate and infrastructure showed no improvement. The home appliance industry performed remarkably well, driven by year-end peak season effects; enameled wire enterprises reported concentrated release of stockpiling demand from white goods clients such as air conditioners and refrigerators, with some firms operating at full capacity. The automotive sector maintained steady orders, providing a baseline support for copper wire and cable consumption, though incremental growth was limited. Traditional sectors like construction and hardware were dragged down by the sluggish real estate market, with demand for products like sanitary hardware contracting; brass rod manufacturers reported no incremental support for related orders. Throughout the month, high and volatile copper prices significantly suppressed end-user demand, with downstream procurement showing a clear "buy on dips, not on rallies" pattern, where rigid demand concentrated only during price pullbacks. Overall stockpiling节奏 was more cautious and earlier than in previous years. Looking ahead to February, as the Spring Festival holiday approaches, end-manufacturing enterprises will gradually halt production for the holiday, and pre-holiday inventory replenishment is nearing its end; new orders are expected to shrink substantially. Persistently high copper prices continue to dampen procurement willingness, and uncertainties surround post-holiday work resumption. It is anticipated that end-consumption will enter a seasonal trough in February, testing the order-taking capacity of copper product processors. Inventory and Warehouse Receipts: LME warehouse receipts changed by -1,100 tons compared to the previous trading day to 174,675 tons. SHFE warehouse receipts changed by 1,676 tons compared to the previous trading day to 158,527 tons. On February 2, spot inventories of electrolytic copper in the domestic market stood at 330,400 tons, an increase of 7,600 tons from the previous week. Strategy Copper: Neutral The spot TC for copper concentrate has fallen to a record low of -$49.84/ton. Supply tightness and difficult long-term contract negotiations support the price center, but the comprehensive increase in global visible inventories and the rise in domestic social inventories to over 320,000 tons highlight the suppression of real consumption by high copper prices. With early holiday closures for end-users and the seasonal decline in operating rates at copper product plants, supply-demand contradictions are expected to ease temporarily in February. Copper prices are forecasted to fluctuate between 97,000 yuan/ton and 110,000 yuan/ton in February. Options: Sell Puts Risks Domestic demand declining too rapidly, leading to a significant inventory buildup. Risk of a liquidity crunch overseas. Investment Consulting Business Qualification: CSRC Permit [2011] No. 1289 Disclaimer: This report is prepared based on information believed to be reliable and publicly available, but the Company makes no warranty as to its accuracy or completeness. The opinions, conclusions, and forecasts contained in this report reflect only the views and judgments as of the date of publication. The Company may issue research reports at different times that contain opinions, assessments, and forecasts inconsistent with those herein. The Company does not guarantee that the information contained herein remains current. The Company may modify the information contained in this report without notice, and investors should pay attention to any corresponding updates or modifications. The Company strives for objectivity and fairness in the content of its reports, but the views, conclusions, and recommendations provided are for reference only and should not replace investors' independent judgment. Neither the Company nor the author shall bear any legal liability for any consequences resulting from investors' reliance on or use of this report. Copyright of this report is owned solely by the Company. 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