Copper futures on the Shanghai Futures Exchange showed a mixed performance in the latest session. The main contract for July 2026 opened at 101,890 yuan per tonne and settled at 103,160 yuan, marking a 0.30% increase from the previous trading day's close. The overnight session saw the same contract open at 103,750 yuan and close at 103,920 yuan, representing a gain of 1.58% from the afternoon session's settlement.
Spot Market Conditions
According to data from SMM, spot prices for Grade-A electrolytic copper were at a premium of 120 to 180 yuan per tonne over the June 2026 futures contract, averaging 150 yuan per tonne. This represents an increase of 15 yuan from the previous day. The July 2026 contract fluctuated within a range, opening at 102,220 yuan and trading between 102,200 and 102,590 yuan before closing at 102,340 yuan. The spread between monthly contracts shifted from a contango of 10 yuan to a backwardation of 50 yuan, while import arbitrage profits ranged from 70 to 140 yuan. Trading sentiment in the Shanghai copper market improved, with notable price divergence across different copper grades. Low-priced supplies became scarce in the afternoon, with standard-grade copper transacting at a premium of 130 to 160 yuan. Inventory levels continued to decline, with significant reductions reported in Shanghai and Jiangsu warehouses, pushing the market into a backwardation structure and strengthening sellers' pricing power. Although the import arbitrage window is open, logistics and customs clearance are constraining short-term arrivals. Combined with increased downstream stockpiling ahead of a typhoon and a general pickup in trading activity, spot premiums over the July contract are expected to remain broadly stable.
Key Market Developments
Geopolitical tensions persist as the United States continues military strikes against approximately 90 Iranian military targets. Iran retaliated with attacks on U.S. military bases across the Middle East. The White House is reportedly preparing for a potential conflict with Iran that could last from several days to weeks. A U.S. official indicated the escalation's duration hinges on whether Iran continues targeting commercial shipping in the Strait of Hormuz. Diplomatic efforts are underway, with Pakistan and Qatar establishing new communication channels with the U.S. and Iran aimed at halting military actions and resuming negotiations based on the "Islamabad Memorandum of Understanding." Pakistani sources remain optimistic about preserving the agreement despite the renewed conflict. On the monetary policy front, the new Federal Reserve Chair has unveiled the roster for five key working groups focused on central bank reform. The panel includes prominent figures from venture capital, technology, academia, and global central banking, such as Marc Andreessen, Mervyn King, N. Gregory Mankiw, and Thomas Sargent.
Mining Sector Update
In mining news, copper producer Trekor Metals (formerly Taseko) has formally submitted a detailed project description for its Yellowhead copper project to the Environmental Assessment Office of British Columbia, Canada. The submission provides enhanced technical details for the proposed open-pit mine and incorporates community feedback from prior consultations, advancing the project's environmental review. Located in the Thompson-Nicola region of BC, the Yellowhead project has a planned mine life of 25 years with an average annual production of 178 million pounds of copper in concentrate. Stuart McDonald, President and CEO of Trekor, described the submission as a crucial milestone, paving the way for the next phase of provincial assessment and subsequent readiness decisions. Environmental studies and engineering work are ongoing, with field surveys and drilling programs scheduled for this summer. If approved, Yellowhead would become Canada's second-largest copper mine.
Refining, Imports, and Inventory
Data from Mysteel shows that as of July 9, spot inventories of electrolytic copper in the domestic market stood at 169,900 tonnes, a decrease of 33,000 tonnes from July 2 and 25,400 tonnes from July 6. Breakdowns show Shanghai inventories at 113,900 tonnes (down 22,100 tonnes from July 2), Guangdong at 24,200 tonnes (down 7,500 tonnes), and Jiangsu at 27,400 tonnes (down 3,800 tonnes). Domestic social inventories experienced a significant weekly drawdown across all major markets. This decline is attributed to reduced arrivals of imported copper at warehouses due to typhoon-related disruptions, coupled with consistently low inflows of domestically produced metal. With copper prices stabilizing, downstream consumers seized the opportunity to purchase at lower levels, maintaining high warehouse outflows and leading to the substantial inventory drop.
Consumption Outlook
An industry outlook for copper foil suggests a steady expansion in market demand. This is driven by the implementation of domestic policies supporting energy storage and digital infrastructure under the national plan, alongside overseas growth in renewable energy, rising penetration of new energy vehicles, advancements in AI and 5G/6G technologies, and the peak season for consumer electronics. On the supply side, industry production schedules are full, and the commissioning of new capacity remains uncertain. The supply-demand balance for lithium battery copper foil is expected to remain tight in the second half of the year, supporting high processing fees. SMM data indicates the industry's overall operating rate is projected to rise to 92.15% in July. Regarding trade, the contraction of traditional copper foil supply overseas is enhancing the competitive advantage of Chinese exports. Export volumes are expected to grow, narrowing the trade deficit, and significant potential remains for domestic substitution in high-end copper foil segments.
Warehouse and Exchange Inventories
LME warehouse stocks decreased by 2,900 tonnes to 307,750 tonnes compared to the previous trading day. SHFE warehouse receipts fell by 3,487 tonnes to 53,849 tonnes. As of July 6, spot inventories of electrolytic copper in the domestic market were 165,000 tonnes, a decrease of 27,200 tonnes from the prior week.
Trading Strategy Summary
Copper Outlook: Cautiously Bullish
Overall, the copper market exhibits relatively strong fundamentals, characterized by persistently low treatment charges, ongoing supply disruptions at the mine level, supportive demand narratives from AI, and stable grid investment. However, macroeconomic uncertainties, such as intermittent market expectations for Federal Reserve interest rate hikes, prevent the formation of a sustained one-way rally. Copper prices are therefore expected to maintain a firm but range-bound pattern. Companies with hedging requirements may consider buying hedges around the 102,000 yuan per tonne level.
Arbitrage Strategy: Pause
Options Strategy: Sell Put Options
Key Risk Factors
A rapid decline in domestic demand leading to a significant inventory buildup, and the risk of a liquidity crunch in overseas markets.
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