Global copper markets retreated from recent highs as anticipated on Thursday, June 4th.
The main Shanghai copper futures contract for July 2026, pressured by profit-taking from long positions, trended lower and closed at 105,150 yuan per tonne, down 1,720 yuan or 1.61%, erasing recent accumulated gains.
Spot prices also weakened, with the Yangtze River 1# copper price dropping sharply by 1,210 yuan to 105,450 yuan per tonne.
Despite the absolute price remaining high, downstream processing enterprises adopted a cautious, wait-and-see approach, purchasing only as needed and pressing for lower prices.
Spot market trading was subdued, with apprehension about high prices dominating sentiment.
The current pullback in copper prices is not due to a collapse in fundamentals, but rather the result of a shift in macro trading logic converging with the weak reality of the off-season for physical demand.
On the macro front, the protracted geopolitical standoff between the US and Iran has fueled ongoing market concerns about a prolonged US maritime blockade, pushing up global energy prices and imported inflation pressures.
Simultaneously, as the US tariff policy enters an adjustment window, items like automobiles, steel, aluminum, and copper have been removed from the Section 232 tariff list, though new regulation details are set to be finalized in July.
This has significantly heightened market risk aversion.
Under the combined pressure of a strong US dollar and geopolitical hedging, long-position capital opted to exit at high levels, leading to the decline in copper prices from their peaks.
However, from a micro, industry fundamentals perspective, the copper market is demonstrating remarkable resilience against the downturn, primarily due to structural tightness in the global supply chain.
On the supply side, the global tightness in mine supply remains unaltered.
Although Peru's copper output in April saw a slight year-on-year increase, it declined month-on-month to 230,000 tonnes.
Furthermore, operations at Chile's Antofagasta mine were partially suspended due to an earthquake, and the restart of the Grasberg copper mine has been delayed.
Consequently, spot treatment and refining charges (TC/RCs) for copper concentrate have accelerated their decline, breaking below the extreme low of -$100 per tonne.
Coupled with China's policy restricting sulfuric acid exports, pressure on smelters from raw material shortages has intensified, and expectations of supply tightness continue to provide solid underlying support for copper prices.
On the demand side, a clear "K-shaped" structural divergence is evident.
On one hand, the global wave of AI computing infrastructure investment is driving explosive demand in data centers, optical modules, and advanced packaging, bestowing a new "computing metal" premium logic upon copper.
On the other hand, traditional consumption areas are showing weakness, with air conditioner production schedules declining and demand for copper in real estate and construction remaining persistently sluggish.
Additionally, China's electronic information manufacturing industry maintained robust growth from January to April, with value-added output up 14% year-on-year, providing solid support for related metal demand and offsetting some of the weakness in traditional sectors.
Furthermore, arbitrage logic across markets is reshaping the global copper trade landscape.
Ahead of the approaching US Section 232 tariff investigation results due by June 30th, the price spread between COMEX and LME copper has been widening.
This cross-market arbitrage is driving the continuous transfer of LME copper inventories to the US, with New York copper stocks continuing to climb.
The changing inventory landscape outside the US is becoming a significant variable driving copper prices.
Looking ahead, the copper market is currently in a period of intense confrontation between macro risk-off sentiment and the weak reality of the physical off-season.
In the short term, risk aversion triggered by geopolitical tensions and downstream caution towards high prices are likely to dominate, potentially pressuring copper prices into a phase of correction, with significant resistance noted around the 108,000 yuan per tonne level.
However, from a medium-to-long-term perspective, the absolute shortage of mine supply and demand from AI computing infrastructure make a deep price decline unlikely.
Each sharp drop is expected to attract buying from industrial players, with strong support seen in the 102,000 to 103,000 yuan per tonne range.
Copper prices are projected to trade within a range of 104,000 to 107,500 yuan per tonne in the coming session.
Overall, the current decline appears more driven by sentiment and profit-taking in the capital markets.
Supported by hard constraints on supply, copper prices are likely to maintain a pattern of wide fluctuations at elevated levels.
It is suggested that industrial clients consider gradual buying for hedging purposes within the 103,000 to 105,000 yuan per tonne range.
Investors are cautioned against chasing rallies or selling into panics, while more conservative participants may prefer to wait for greater clarity from upcoming macroeconomic data before making positioning decisions.
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