Copper futures prices experienced a modest rebound.
Market Highlights and Key Data
Futures Market Activity
On July 1, 2026, the most-traded SHFE copper contract opened at 102,870 yuan per tonne and closed at 101,920 yuan per tonne, representing a decline of 1.33% from the previous trading day's close. In the overnight session, the contract opened at 101,830 yuan per tonne and settled at 102,520 yuan per tonne, marking a slight increase of 0.07% from the afternoon session's closing price.
Spot Market Conditions
According to SMM data, spot prices for SMM Grade 1 # electrolytic copper were quoted at a premium ranging from flat to 80 yuan per tonne against the June 2026 contract, with an average premium of 40 yuan per tonne. This represents a 40 yuan per tonne increase from the previous day. The July 2026 SHFE copper contract opened with a gap down in the morning session, hitting a low of 101,800 yuan per tonne before recovering slightly to close at 102,020 yuan per tonne. The inter-month spread ranged from a premium of 50 yuan per tonne to a discount of 20 yuan per tonne. The import loss for the current-month contract was between 230 and 310 yuan per tonne. Trading sentiment in the Shanghai market improved, with non-registered copper stocks clearing quickly at lower prices in the morning. Sellers subsequently adjusted their offers, with premiums for high-grade copper remaining firm. Trading activity slowed in the afternoon. As the new month's procurement cycle begins, downstream restocking demand is expected to support market activity. The scarcity of low-priced material is strengthening sellers' resolve to hold firm on prices, and the lower copper prices are attracting buying interest. Spot premiums against the July contract are anticipated to rise slightly today.
Key Information Summary
Federal Reserve Chair Wash, speaking at the European Central Bank's Central Banking Forum, reiterated that the Fed would not provide forward guidance on future interest rate policy. Wash stated that inflation risks have diminished but inflation levels remain too high. The Fed will "chart a new policy path" and hopes for a full discussion at the July meeting. He emphasized the Fed's commitment to policy independence and its intention to continue reducing the balance sheet. Wash also noted that AI is reshaping the economy, but its inflationary effects remain to be seen. Overall, the tone was dovish, though the lack of forward guidance may unsettle markets.
On the mining front, foreign news reported on July 1 that the Sierra Gorda copper mine in Chile, a joint venture between Poland's KGHM Polska Miedź and South32, has approved the final investment decision for the Phase 4 grinding line project. The project, with an estimated investment of $725 million, will be funded by operational cash flow and joint venture debt financing. Leveraging existing infrastructure, this expansion project offers advantages of lower investment intensity, shorter construction timelines, and reduced execution risk compared to greenfield projects. It represents a key strategic move to optimize the capacity of the partners' core copper assets. The Phase 4 project involves installing a new grinding line and expanding crushing and flotation capacity to increase annual ore processing from approximately 48 million tonnes to 60 million tonnes. First production is targeted for mid-FY2030, with full capacity expected in FY2031. Upon completion, payable copper production is forecast to average about 195,000 tonnes per year, a roughly 30% increase from current levels, while unit operating costs are projected to decrease by approximately 10%. Sierra Gorda produced about 157,900 tonnes of copper in 2025.
Regarding smelting and imports, foreign news on June 30 reported that data from Chile's National Statistics Institute showed the world's largest copper producer's output fell 12.9% year-on-year in May to 423,623 tonnes. INE attributed this decline to adverse weather conditions reducing biomass in fishing zones, which impacted the fishing and food processing industries. Manufacturing output fell 7.2% year-on-year, the largest drop since November 2022 and significantly worse than the 2.5% decline forecast by economists surveyed by Reuters. Food manufacturing, dragged down by lower fish production, fell 10.9% and was the main factor behind the manufacturing decline. Chilean copper production has now fallen for two consecutive months, with a roughly 9% drop in April and a further widening decline in May, reflecting the combined impact of lower ore grades, operational challenges, and adverse weather.
On the consumption side, foreign news on June 30 indicated that Ferrari and BMW are introducing new models featuring lightweight aluminum wiring harnesses, accelerating the automotive industry's shift from traditional copper wiring to aluminum. Ferrari began using aluminum power cables in its 296 hybrid sports car last year and has since expanded the technology to other models, including its first all-electric vehicle, the Luce, reportedly reducing total wiring harness weight by up to 20%. BMW, which first used aluminum wiring in its 1 Series in 2011, has been expanding its application and now extensively uses aluminum cables in both high and low-voltage systems within its latest eDrive electric technology. Stellantis has also recently begun substituting copper with aluminum. According to JPMorgan forecasts, this trend in the automotive sector could impact about 2% of global copper demand in 2026. Current copper prices are approximately 4.2 times those of aluminum. In late January, copper prices neared a historical high of around $15,000 per tonne. If copper supply remains tight and prices stay elevated, up to 6% of copper demand could be substituted by aluminum by 2030. Aluminum is currently priced around $3,100 per tonne, roughly a quarter of the copper price.
Inventory and Warehouse Receipt Data
LME warehouse receipts decreased by 4,375 tonnes from the previous day to 324,850 tonnes. SHFE warehouse receipts decreased by 1,048 tonnes to 73,569 tonnes. As of June 29, domestic spot inventories of electrolytic copper in China stood at 207,400 tonnes, an increase of 1,400 tonnes from the previous week.
Trading Strategy
Copper Outlook: Neutral
Persistent tightness in the mining sector provides underlying support, but weak seasonal demand from domestic end-users caps the upside. The market is characterized by a weak, range-bound pattern with support below but lacking upward momentum. Deeply negative treatment charges for copper concentrate, a significantly narrowed price spread between scrap and refined copper, and copper product orders only supported by low-price restocking indicate no sustained bullish signals across the industrial chain. The macro environment remains pressured by a strong US dollar next week. Close attention should be paid to the potential implementation of US tariffs on refined copper. Operationally, consider selling high and buying low within the 101,000-104,500 yuan per tonne range for SHFE copper. Avoid chasing rallies unilaterally. Apart from hedging needs, it is also not advisable to increase short positions.
Arbitrage Strategy: Pause
Options Strategy: Pause
Key Risk Factors
An overly rapid decline in domestic demand leading to a significant inventory build-up.
Liquidity crunch risks in overseas markets.
Comments