Trade policies fluctuate repeatedly, copper prices fluctuate widely in May

1、 Trend analysis

According to monitoring data from Shengyi Society, copper prices fluctuated widely in May. At the beginning of the month, the copper price was 77996.67 yuan/ton, and at the end of the month, the copper price fluctuated to 78556.67 yuan/ton, with an overall increase of 0.72% and a year-on-year decrease of 7.05%.
According to the Business Society’s current chart, copper spot prices in May were mostly higher than futures prices, with the main contract being the expected price two months later, and the expected future price may be under pressure.
According to LME inventory, LME copper inventory decreased significantly in May. As of the end of the month, LME copper inventory was 162150 tons, down 18% from the beginning of the month.
Macroscopically, the trade policies in May have been fluctuating, and the macro fundamentals have not substantially improved. At present, there are variables in the trade negotiations between the United States and Europe. The European Central Bank has made it clear that attention should be paid to the downside risks of the trade war on the eurozone economy, and hinted that the June July interest rate meeting may suspend interest rate cuts. This statement resonates with the Federal Reserve’s call for maintaining interest rate stability, and the rebound of the US dollar index poses a short-term pressure on copper prices.
Supply side: A large copper mine in Congo has been shut down due to an accident, causing concerns in the market about short-term supply tightening. Although the global supply margin of refined copper is widening, the increase in mining interference rate coupled with the expansion of negative spot TC (processing fee) suggests that the upstream resource shortage has not fundamentally eased, and the continuous decline in LME inventory also confirms the pressure on the supply side.
Downstream: In May, terminal consumption showed a differentiation pattern of “weak cables and strong home appliances”: cable enterprise orders weakened month on month, reflecting a slowdown in the pace of infrastructure investment landing; The home appliance sector maintained production intensity due to export resilience, but overall demand intensity was weaker than expected at the beginning of the month. High copper prices have suppressed downstream procurement, resulting in limited inventory demand before the Dragon Boat Festival holiday. Downstream customers only accept low-priced goods, and spot trading activity is low.
According to the annual price comparison chart of Shengyi Society, in the past five years, copper prices have fallen more or risen less in June, and the copper price decline in June this year is a highly probable event.
In summary, the main suppressing factors are the off-season of consumption, high copper prices that suppress demand, and trade policy uncertainty. The resilience of the US economy, expectations of China’s stable growth policies, and disruptions in mining supply provide bottoming out momentum. Overall, copper prices are expected to fluctuate weakly in June.