The decision by former U.S. President Donald Trump to cancel planned airstrikes on Iran and his statement about a potential weekend peace agreement have boosted market sentiment. Overnight, London copper closed higher by 0.94%. The tariff-driven 'siphoning effect' from the U.S. is tightening supplies outside the U.S., while in China, spot premiums have recovered during the off-season and purchasing activity is warming up. Spot copper prices are likely to rise today.
Copper Futures Market
The cancellation of the airstrike plan on Iran and the mention of a potential peace deal to be signed this weekend improved market mood. Overnight, London Metal Exchange (LME) copper prices touched a low before surging in a straight line. The latest closing price was $13,575 per tonne, up $126 or 0.94%. Trading volume was 21,178 lots, a decrease of 3,663 lots, while open interest fell by 2,125 lots to 265,309 lots. On the Shanghai Futures Exchange (SHFE), night session copper prices opened lower and fluctuated uncertainly before closing higher, lifted by the strong performance of overseas markets. The most active July 2607 contract closed at 103,540 yuan per tonne, up 130 yuan or 0.13%.
LME copper inventories as of June 11 stood at 367,300 tonnes, a decrease of 2,275 tonnes or 0.62% from the previous trading day.
In today's early trading, the SHFE's most active July 2607 copper contract opened higher. At 09:00 Beijing time, its latest opening price was 104,510 yuan per tonne, an increase of 1,100 yuan.
Macroeconomic Backdrop
On the macro front, U.S. May Producer Price Index (PPI) data released on Thursday showed a year-on-year increase of 6.5% (versus an expected 6.4% and a previous 5.7%), while core PPI rose 4.9% year-on-year (below the expected 5.4%). This indicates persistent upstream inflationary pressures. Markets rapidly repriced expectations, with bets on a Federal Reserve rate cut this year vanishing and some traders beginning to speculate on the possibility of a rate hike within the year. Although the U.S. Dollar Index has declined for two consecutive sessions, it remains above 99.9, continuing to dampen the appeal of dollar-denominated copper and capping its upside potential. Geopolitically, Trump stated he would "hit Iran hard" and occupy the Kharg Island oil facilities, but later announced the cancellation of airstrikes and hinted that a "U.S.-Iran peace agreement restoring navigation in the Strait of Hormuz could be signed this weekend." The volatile situation has caused market swings. Driven by these de-escalation signals and a broad rally in U.S. stock markets, both LME and SHFE copper prices staged a technical rebound.
Domestic Factors
Domestically in China, savings bonds have for the first time been included in the investment scope for personal pension funds (with a 70 billion yuan quota now on sale). The central bank is maintaining reasonably ample liquidity and lowering financing costs for the real economy. Policy support for the private sector and high-end manufacturing continues to emerge, warming market expectations for an economic recovery in the second half of the year.
Industry Fundamentals
Industry fundamentals present a mixed picture, but support from the raw materials side remains stubborn. On the supply side: Chile's Sierra Gorda and BHP Group Ltd's (ASX: BHP) Spence operation signed a Memorandum of Understanding to explore collaboration (addressing declining ore grades and aiming for cost reduction and efficiency gains). However, supply disruptions are frequent in South America, Peru, and the Democratic Republic of Congo (DRC), with the DRC raising its strategic mineral tax rate to 10%. The Middle East situation has triggered sulfur shortages, compounded by China's restrictions on sulfuric acid exports, leading to a global "acid shortage" that is constraining the release of hydrometallurgical copper capacity. The spot treatment and refining charges (TC/RC) index for Chinese copper concentrate has plunged deep into negative territory, below -$110 per dry metric tonne, indicating unrelenting tightness in concentrate supply. Driven by potential U.S. tariff expectations, COMEX copper inventories have been rising continuously, while LME copper inventories have dropped to 367,000 tonnes (a two-month low). SHFE copper inventories have declined consecutively, hitting a new low for the year. Visible inventories in non-U.S. regions are being drawn tight, with the widening C-L spread supporting LME copper prices. On the demand side: Traditional consumption has entered the off-season due to high temperatures, slowing outdoor construction activity, and weak new orders from end-users. However, after the recent copper price pullback, spot premiums have recovered, and downstream users have shown increased willingness to replenish stocks on dips, leading to a slight improvement in trading activity. The new energy sector shows marginal improvement: China's May new energy vehicle production and sales increased by 22.4% and 14.4% year-on-year respectively, with a penetration rate of 56.9%. Global lithium battery demand is projected to grow by 35% in 2026, driving up copper foil processing fees by 1,500-2,000 yuan per tonne, providing medium-to-long-term bullish factors.
Overall Outlook
In summary, macro headwinds (a strong U.S. dollar, rate hike expectations) persist, and copper prices still face the risk of further correction and testing. However, deeply negative TC rates for concentrate, inventory drawdowns in both LME and domestic warehouses, and incremental demand from the new energy sector jointly form a solid price floor. Today's rebound is largely driven by fund short-covering and technical correction following the expectation of geopolitical de-escalation. It is expected that the SHFE's most active copper contract will maintain a range-bound movement between 103,000 and 105,500 yuan per tonne in the near term.
Today's reference range for spot prices is 103,000 to 105,500 yuan per tonne.
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