On May 15th, the copper futures market experienced significant volatility. Shanghai copper futures plummeted from earlier highs, nearly erasing all intraday gains, with the price center shifting notably lower. The main June 2024 contract (2606) opened at 107,250 yuan per tonne, reached a high of 107,320 yuan, and fell to a low of 104,690 yuan. Settling at 107,620 yuan the previous day, it closed at 104,710 yuan, down 2,910 yuan or 2.70%. The total trading volume for the SHFE copper 2606 contract increased by 13,787 lots to 161,082 lots for the day, while open interest decreased by 17,232 lots to 170,485 lots. During the Asian session, LME copper also saw a sharp decline, with the latest quote at $13,631.5 per tonne as of 15:05 Beijing time, down $353 or 2.52%.
According to price statistics, domestic spot copper prices fell sharply. The Yangtze River spot 1# copper price was quoted at 107,590 yuan per tonne, down 1,950 yuan, with premiums ranging from 160 to 200 yuan, unchanged. The Yangtze River composite 1# copper price was quoted at 105,795 yuan per tonne, down 1,920 yuan, with premiums from 130 to 240 yuan, up 30 yuan. The Guangdong spot 1# copper price was quoted at 105,930 yuan per tonne, down 1,860 yuan, with premiums from 220 to 420 yuan, up 90 yuan. The Shanghai region 1# copper price was quoted at 105,660 yuan per tonne, down 1,960 yuan, with premiums from 10 to 90 yuan, down 10 yuan.
Market analysis indicates that while both LME and SHFE copper prices reached new highs earlier this week not seen since late January, a significant correction occurred on Thursday and Friday. This was driven by a combination of shifting hawkish macroeconomic expectations and technical selling pressure. This is not a trend reversal but rather a consolidation following a rapid rally.
On the macroeconomic front, inflation data has dampened sentiment, leading to a retreat in interest rate cut expectations. The US April CPI rose 3.8% year-on-year (core CPI +2.8%), marking the highest level since May 2023, indicating persistent inflationary pressures. The April PPI surged 6.0% year-on-year and 1.4% month-on-month, representing the strongest wholesale inflation figures since late 2022, further reinforcing the reality of stubborn inflation. The market has largely abandoned expectations for rate cuts within the year and has even begun pricing in the possibility of rate hikes. The US dollar index strengthened to near one-week highs, directly dampening the appeal of dollar-denominated commodities like copper. Although high-level meetings between China and the US provided some positive sentiment, it was insufficient to offset the negative impact of tightening macroeconomic liquidity. From a capital flow perspective, the rapid rise in copper prices this week led to overcrowded long positions. As the macroeconomic outlook turned negative, a significant amount of accumulated profit-taking triggered a technical sell-off.
On the fundamental supply side, strong support remains. While Zambia has relaxed its sulfuric acid export restrictions, global mining risks remain severe. Delays in Indonesian mine restarts, production declines in Chile and Zambia, Peru's energy crisis, coupled with persistently low copper treatment and refining charges (TC) in China, indicate that the fundamental shortage of copper concentrate has not changed. This provides a solid cost floor for copper prices.
Demand is undergoing a structural shift. In emerging sectors, AI servers (with sharply increased copper consumption per unit) and the intelligence of new energy vehicles are core engines supporting the long-term bullish thesis. However, traditional consumption areas remain weak. The real estate sector is still in a difficult position, and current high prices have significantly suppressed downstream procurement. There are signs of inventory accumulation in social stockpiles. Combined with the impact of stricter tax audits affecting trade flows, these factors constitute short-term headwinds, exacerbating the pressure for a correction.
In the spot market, the sharp price decline, coupled with the weekend effect and contract rollover, led downstream buyers to seek bargains for restocking. High premiums in the Guangdong market supported sellers in maintaining firm prices. However, downstream purchases were primarily based on rigid demand and long-term contracts. Spot trading activity was lackluster, with overall market activity remaining subdued.
Regarding the subsequent trend, analysis suggests a tug-of-war between hawkish macroeconomic expectations (strong dollar, high interest rates) and tight fundamental supply from the mining side. Copper prices may face correction pressure in the short term, but downside is likely limited against the backdrop of global supply tightness (extremely low TC). It is expected that SHFE copper will fluctuate widely within the range of 102,000 to 108,000 yuan per tonne in the early part of next week. Operationally, it is advised to monitor the support level around 102,000 yuan. If prices stabilize there, it could be viewed as a buying opportunity during a bull market correction.
Risk Warning: Close attention should be paid to further guidance from Federal Reserve officials' speeches regarding interest rate hike expectations, as well as potential disruptions to crude oil and transportation costs from Middle East geopolitical tensions.
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