Market Overview and Key Data

Futures Market: On May 20, 2026, the main Shanghai copper futures contract opened at 104,130 yuan per tonne and closed at 103,950 yuan per tonne, representing a decline of 0.55% from the previous trading day's close. During the night session, the main contract opened at 104,060 yuan per tonne and closed at 105,140 yuan per tonne, an increase of 1.49% from the afternoon session's close.

Spot Market Conditions: According to SMM data, holders began offering at lower premiums early in the session. Mainstream standard-grade cathode copper was quoted at a premium of around 400 yuan per tonne. Prices for brands like Tiefeng, Zhongtiaoshan PC, and Jinfeng in Shanghai and Changzhou markets dropped to premiums near 350 yuan per tonne, before transactions were settled at premiums of 320-340 yuan per tonne under pressure. At this point, mainstream standard-grade cathode copper was still quoted at premiums of 380-400 yuan per tonne due to tight supply. High-grade copper, primarily from Jinchuan, was quoted at a premium of around 420 yuan per tonne, with CCC-P remaining in short supply. Entering the second trading session, some supplies from Japan, South Korea, Dajiang PC, and Dajiang HS were offered at premiums of 300-320 yuan per tonne. Lower prices attracted downstream purchasing, with the daily market procurement sentiment index rising to 3.18 and the sales sentiment index increasing to 3.29. Spot traders in Shanghai copper are concerned about potential further declines in premiums and are actively selling to lock in profits.

Key Information Summary:

Geopolitics: U.S. President Trump stated that negotiations with Iran have entered the final stage, and the outcome will be seen soon—either an agreement will be reached or some challenging actions may be taken, though it is hoped this will not occur. Trump informed Israeli Prime Minister Netanyahu that mediators are drafting a letter of intent. The U.S. and Iran will jointly sign this document to formally end hostilities and initiate a 30-day negotiation period to discuss issues related to Iran's nuclear program and navigation in the Strait of Hormuz.

Federal Reserve: The meeting minutes indicated that many policymakers advocated for removing accommodative bias. Most participants believed that if inflation persists above 2%, policy tightening would be necessary. Only a few officials supported future rate cuts, with the hawkish tone far exceeding market expectations. CME data shows the market's probability of a 25 basis point Fed rate hike by year-end has risen to 60%, with expectations for a rate cut in 2026 nearly vanishing.

Mining Sector: Foreign news on May 19 reported that the Chilean Copper Commission (Cochilco) stated global mined copper production is forecast to grow by 0.5% to 23.3 million tonnes in 2026 and by 4.7% to 24.39 million tonnes in 2027. The main increments are expected from the Democratic Republic of Congo, Zambia, Mongolia, Canada, and the United States. Despite the supply growth, the refined copper market is expected to remain tight. Cochilco forecasts a global refined copper market deficit of 124,000 tonnes in 2025, shifting to a slight surplus of 12,000 tonnes in 2026, and expanding to a surplus of 153,000 tonnes in 2027. As the world's largest copper producer, Chile is projected to account for approximately 22% of global copper mine output. However, the country's copper mine production is expected to decline by 2.0% to 5.3 million tonnes in 2026 (due to declining ore grades, planned maintenance, and operational constraints) before recovering by 4.0% to 5.5 million tonnes in 2027, still representing about 22% of global mine output. Cochilco noted that the 2026 decline in Chilean copper production is primarily attributed to lower ore grades, planned maintenance, operational limitations, and a weak start to the year, aligning with challenges such as resource aging and increased mining difficulties faced by some major global mines.

Smelting and Imports: Foreign news on May 1, citing Reuters, reported that several major Chinese copper smelters gathered in Beijing on Tuesday for discussions with government officials regarding negotiation strategies for copper concentrate treatment and refining charges (TC/RCs) in the second half of the year. Officials from the China Nonferrous Metals Industry Association attended the meeting. A global shortage of copper concentrate has put pressure on processing fees, with spot TCs remaining negative for 16 consecutive months, dropping to -$102.60 per tonne on May 15. Chinese copper smelters are currently preparing for a new round of contract negotiations with Chilean miner Antofagasta. The agreed processing fees between the two parties will serve as a benchmark for Chinese smelters in signing processing agreements with other mining companies. Last year, Antofagasta reached a zero-processing-fee agreement with Chinese companies for 2026, setting a historic low. The China Nonferrous Metals Industry Association previously called for the industry to resist negative processing fees.

Consumption: On May 18, Chujiang New Materials stated in response to investor inquiries that several projects, including the "Annual 50,000 Tonnes High-Precision Copper Alloy Strip and Foil Project" and the "Annual 60,000 Tonnes High-Precision Copper Alloy Rolling Strip Expansion and Renovation Project," commenced production by the end of 2025 and are currently in the ramp-up phase. The company aims to expedite the achievement of planned production capacity. Its subsidiary, Xinhai Gaodao, has established a dual-track "copper + aluminum" solution. The fifth-phase aluminum alloy conductor project has been put into operation, featuring a newly built intelligent factory spanning 17,500 square meters equipped with multiple globally advanced German-made Niehoff multi-wire drawing and annealing machines for fine aluminum wire and several domestically leading high-end aluminum wire production lines, forming a complete advanced production line. This can provide lighter and more cost-effective new material solutions for high-growth industries such as new energy vehicles, photovoltaic power generation, and aerospace.

Inventory and Warehouse Receipts: LME warehouse receipts decreased by 1,275 tonnes to 393,400 tonnes compared to the previous trading day. SHFE warehouse receipts decreased by 1,236 tonnes to 101,014 tonnes compared to the previous trading day. On May 18, domestic market electrolytic copper spot inventory stood at 242,900 tonnes, a decrease of 4,000 tonnes from the previous week.

Strategy Cautiously Bullish

Last week, copper prices surged before retreating. On the macro front, elevated U.S. inflation and interest rates suppressed risk appetite, while supply-side support came from Middle East tensions and Peru's energy crisis. Fundamentally, the mining sector remains tight, smelting operations are stable, import losses have widened, and the scrap copper market is in a weak supply-demand balance. Copper product operating rates are constrained, with end-user demand primarily driven by rigid needs. Amid multi-party博弈 (gameplay), copper prices fluctuated within a range. The expected fluctuation range for this week is between 103,000 yuan per tonne and 105,600 yuan per tonne. However, the recommended operational strategy remains buying on dips for hedging purposes.

Arbitrage: Pause for now. Options: Sell put options.

Risks Excessively rapid decline in domestic demand leading to significant inventory accumulation. Overseas liquidity squeeze risks.