Copper prices are likely to increase today, supported by a combination of weaker-than-expected U.S. non-farm payroll data, which has dampened interest rate hike expectations, and a continued decline in inventories. The underlying market structure is characterized by a persistently tight ore supply and an atypical seasonal reduction in stockpiles, with spot premiums providing a floor for transaction prices.
In the copper futures market, the disappointing U.S. jobs report, coupled with falling inventories, pushed London Metal Exchange (LME) copper higher in the previous session. The most recent closing price settled at $13,358 per tonne, a gain of $72 or 0.54%. Trading volume decreased by 6,357 lots to 8,490 lots, while open interest fell by 587 lots to 249,740 lots. On the Shanghai Futures Exchange (SHFE), copper futures experienced wide fluctuations on Friday evening. The main August contract (2608) closed at 102,970 yuan per tonne, rising 140 yuan or 0.14%.
LME copper inventories as of July 3 stood at 318,900 tonnes, a decrease of 3,450 tonnes or 1.07% from the previous trading day.
In early trading today, the SHFE's main August copper contract opened higher. The latest opening price as of 09:01 was reported at 103,120 yuan per tonne, an increase of 290 yuan.
Key Macroeconomic Factors
From a macroeconomic perspective, the U.S. June non-farm payrolls increased by a mere 57,000, significantly below the expected 110,000. Figures for April and May were also revised down by a combined 74,000. The unemployment rate edged down to 4.2%, primarily driven by a decline in labor force participation, with approximately 720,000 individuals exiting the workforce, rather than genuine employment improvement. This indicates the labor market is indeed cooling. Adding to this, Federal Reserve Governor Christopher Waller noted that "inflation risks have diminished over the last four weeks." Consequently, traders have scaled back bets on further interest rate hikes this year, with the probability of a July increase falling to about one-third. The U.S. Dollar Index fell roughly 0.54% last week, its largest weekly drop since early April, providing a window for valuation recovery for dollar-denominated copper. According to the CME FedWatch Tool, the probability of holding rates steady by December is 22.9%, while the total probability of a hike is 77.1% (with a combined probability of around 69.2% for hikes of 25 basis points each).
Domestic Policy Developments
Domestically, the Ministry of Finance and other authorities announced that, effective January 1, 2027, the policy of halving vehicle and vessel tax for energy-efficient vehicles and exempting it for purely electric commercial vehicles, plug-in hybrids, and fuel cell commercial vehicles will be cancelled. Purely electric passenger vehicles and fuel cell passenger vehicles, which have no engine displacement and are therefore not subject to the Vehicle and Vessel Tax Law, remain unaffected. This adjustment may have a slight negative impact on the sales of energy-efficient and new energy commercial vehicles in the medium to long term, but its effect on copper consumption is expected to be limited.
Industry Fundamentals Overview
The fundamental industrial landscape is defined by a "solidified tight ore supply coupled with seasonally weak but structurally resilient demand." On the supply (ore) side, which provides strong support, the Peruvian government has declared a 60-day state of emergency due to El Niño warnings. Currently, major copper mines such as Antamina and Quellaveco are operating normally, with limited impact on rail logistics, though potential disruptions to mountain roads/barges during the rainy season require ongoing monitoring. In Chile, Antofagasta has finalized mid-year long-term agreements with key domestic smelters, shifting from a fixed TC/RC to a structure linked to spot indices with a floor price. Spot treatment charges (TCs) remain deeply negative (latest around -$126.8 per dry metric tonne), meaning smelters are effectively paying to process ore, severely compressing their profits and signaling the ore supply side has firmly regained pricing power. Slow production recovery at Indonesia's Grasberg mine, flood-related output reductions at the Kamoa-Kakula mine in the Democratic Republic of Congo, and a 12.94% year-on-year drop in Chile's May copper production all point to unresolved raw material shortages.
On the demand side, July is a traditional off-season where high temperatures and rainfall typically suppress outdoor construction and infrastructure activity. The property sector shows only weak recovery in first-tier cities, with nationwide conditions remaining sluggish. Processing plant operating rates are gradually declining, and raw material procurement remains cautious. However, structural resilience in copper demand is provided by ongoing expansion in AI computing infrastructure (approximately 40 tonnes of copper per MW for data centers), ultra-high voltage/power grid upgrades (investment up 43.32% from January to May), and new energy vehicle production (up 2.5% from January to May). The price differential between refined and duty-paid scrap copper has narrowed to around 2,500 yuan per tonne, limiting substitution by scrap and resulting in stronger-than-expected refined copper consumption resilience.
Inventory and Spot Market Conditions
Regarding inventories, SHFE copper stocks for the week ending July 3 fell by 13,055 tonnes week-on-week to 122,677 tonnes, a decrease of 9.62%. This atypical drawdown during the off-season confirms underlying rigid demand for refined copper. LME copper inventories are also declining gradually, with the cancelled warrant ratio around 39%, providing evidence of tight physical supply outside the U.S. In the spot market, downstream buyers continue purchasing based on immediate needs. With circulating supply tightening, holders are increasingly willing to support prices, making low-priced material scarce. Spot premiums remain firm.
Summary and Price Outlook
In summary, the disappointing non-farm payrolls data and subsequent cooling of rate hike expectations, alongside a weekly drop in the U.S. dollar, have provided copper prices with breathing room. Tight ore supply (evidenced by deeply negative TCs and Antofagasta's index-linked contracts), continued inventory drawdowns during the seasonal lull, and resilient new-economy demand are forming a solid base. Spot copper prices are anticipated to rise today.
The expected trading range for today is between 102,000 and 104,000 yuan per tonne.
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