Price trend

According to monitoring data from SunSirs, copper prices in May traded sideways at a low level during the beginning of the month; in the middle of the month, prices surged sharply to reach the monthly high before retreating; and during the latter part of the month, they fluctuated within a high-level range. The price of copper stood at 101,498.33 RMB/ton at the start of the month and rose to 104,843.33 RMB/ton by the end of the month, marking an overall increase of 3.33% and a year-on-year rise of 34.01%.

According to data from SunSirs, during the early and late parts of May, the price of the benchmark copper futures contract exceeded the spot price; however, in the middle of the month, the spot price of copper surpassed the futures price. As the month drew to a close, the benchmark futures price once again rose above the spot price, indicating that future copper prices are facing downward pressure.

Market Analysis

According to LME inventory data, LME copper stocks rose initially before falling in May. By the end of the month, LME copper inventory stood at 389,425 tonnes, down 2.09% from the beginning of the month.

Macroeconomic Front: The U.S.-Iran situation—characterized by "talks without a breakdown"—dominated the entire month. A draft ceasefire memorandum surfaced at the beginning of the month; negotiations saw back-and-forth fluctuations mid-month; and by month-end, a draft 60-day Memorandum of Understanding was reached, causing copper prices to fluctuate wildly in response to the news flow. In the U.S., both the April CPI and PCE figures climbed to the vicinity of 3.8%, signaling a broad-based surge in inflation. Market expectations regarding Federal Reserve interest rate hikes—including the possibility of a hike as far out as 2027—intensified, with the U.S. dollar trading at elevated levels and exerting significant downward pressure on copper prices. On May 14, a meeting between U.S. and Chinese leaders established a new strategic positioning for a "constructive and stable relationship," marking the sole positive signal on the macroeconomic front this month. Domestically, China's industrial value-added output grew by 4.1% year-on-year in April; the Manufacturing PMI remained within the expansionary zone, and policy stances continued to be supportive.

Supply Side: Copper concentrate treatment charges (TCs) historically breached the -$100/dry tonne mark, falling to -$108.63/tonne by month-end—a record low—as the structural shortage at the mine level continued to deepen. Key drivers behind this plunge in TCs included the postponement of the Grasberg mine's production restart until late 2027, concerns regarding energy supply in Peru, and rising sulfur prices which drove up the cost of sulfuric acid for smelters. In April, China's imports of copper concentrate plummeted 19.57% year-on-year—marking the first annual decline in over five years. Despite facing extremely negative TCs, smelters continued to maintain operations, relying primarily on excess profits from sulfuric acid sales to hedge their costs; however, following China's imposition of restrictions on sulfuric acid exports starting in May, acid prices have begun to retreat, thereby squeezing smelters' profit margins. Smelter maintenance proceeded in an orderly fashion throughout May; consequently, electrolytic copper output is projected to decline month-on-month to 1.1675 million tonnes, indicating a continued tightness in domestic supply.

Downstream Sector: Traditional sectors have been significantly dampened by high copper prices; in May, the operating rate for copper wire and cable manufacturers stood at only 63.23%, marking a substantial year-on-year decline of 20.26 percentage points. The operating rate for refined copper rods also retreated sequentially to 61.05%. Downstream players exhibited a distinct aversion to high prices, with purchasing activity driven primarily by essential, immediate needs. Power infrastructure remains the sector's strongest pillar of support; the State Grid Corporation continues to ramp up investment, with ultra-high voltage (UHV) projects accounting for an increasing share, resulting in stable order performance for wire and cable products. Emerging sectors maintain a high level of vitality: the penetration rate of new energy vehicles has risen to 56.5%, while the construction of AI computing centers is driving demand for high-end copper products—specifically, orders for high-voltage electromagnetic flat wires are now booked through the second half of 2027. Demand from the construction and real estate sectors remains lackluster; although the price spread between refined copper and scrap copper remains wide, the supply of scrap copper lacks elasticity, thereby sustaining the trend of substituting scrap copper with refined copper.

According to data from SunSirs, copper prices in June have exhibited a weak, fluctuating trend over the past five years.

Comprehensive Analysis of Influencing Factors

Bullish Factors: Treatment and Refining Charges (TCs) have breached the negative triple-digit threshold for the first time, signaling a deepening shortage at the mine supply level; domestic social inventories have fallen to historic lows, while spot market premiums remain robust; demand from power grid and AI infrastructure projects provides a solid floor of support; U.S. stockpiling activities are draining supply from non-U.S. markets, with Goldman Sachs projecting a supply deficit of 640,000 tons in the non-U.S. sector by 2026; the resumption of operations at the Grasberg and Kamoa-Kakula mines has been fully postponed until 2028, leading to a downward revision of 350,000 tons in the 2026 global mine supply forecast; scrap copper supply remains tight, limiting its capacity to serve as a substitute for refined copper.

Bearish Factors: The situation between the U.S. and Iran remains volatile, causing frequent shifts in geopolitical risk sentiment; U.S. inflation has exceeded expectations, and renewed expectations of interest rate hikes are weighing on market sentiment; the traditional off-season for consumption—coupled with high copper prices—is dampening spot market demand, resulting in a significant year-on-year decline in operating rates within the wire and cable sector; new export policies regarding sulfuric acid are squeezing smelting margins; inventories at the LME and COMEX remain at elevated levels, reflecting weak overseas demand; CFTC net fund positioning data indicates a lack of willingness among speculative capital to chase prices higher.

Market Outlook:

In summary, on the supply side, smelter maintenance is expected to persist through June; should restrictions on sulfuric acid exports trigger a price decline, this could prompt substantial production cuts by smelters, thereby creating a structural bullish factor. On the demand side, the traditional off-season continues; however, essential demand from power infrastructure projects—along with growth in emerging sectors—provides medium-to-long-term support. From a macro perspective, if the FOMC’s rhetoric proves less hawkish than anticipated, it could open a window for liquidity conditions to recover; furthermore, should the U.S.-Iran agreement be finalized, it is likely to propel copper prices to new highs, whereas a breakdown of the deal would reignite geopolitical risk premiums. Looking ahead to June and the third quarter, copper prices are expected to continue fluctuating within a wide range at elevated levels; the key variables to watch are the progress of the 60-day memorandum approval between the U.S. and Iran, and the policy stance articulated at the FOMC meeting on June 17.

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