Shanghai Copper Likely to Maintain an Upward Bias in the Short Term

Source: Wenhua Financial, June 4, 2026

Since May, copper prices have experienced a “rise first, then pullback” pattern, remaining in a high-level consolidation range. This movement has largely reflected changes in macroeconomic sentiment and market expectations.

At the beginning of May, easing tensions between the United States and Iran, coupled with news of a U.S. presidential visit to China, boosted market confidence and drove copper prices higher. On May 13, the most-active Shanghai copper futures contract reached RMB 108,900/mt. However, as U.S.-Iran negotiations failed to achieve substantial progress, market optimism gradually faded, leading to a period of correction and consolidation.

Macro Environment Shifts

The market’s macro focus has recently shifted. Direct negotiations between the United States and Iran, which began in Islamabad on April 11, failed to produce an agreement, and no significant progress has been reported since then. Nevertheless, most of the market’s initial concerns have already been absorbed.

Overall, fears surrounding Middle East geopolitical tensions and inflationary pressures have eased considerably, reducing their impact on financial markets. However, investors should continue to monitor developments in U.S.-Iran negotiations.

Between May 13 and 15, U.S. President Donald Trump paid a state visit to China. Trade representatives from both countries reached broadly positive and balanced outcomes, including commitments to implement previous agreements, establish Trade and Investment Councils, address concerns regarding agricultural market access, and promote bilateral trade expansion under a reciprocal tariff-reduction framework.

At President Trump’s invitation, President Xi Jinping is expected to make a state visit to the United States this autumn. Improved market sentiment contributed to gains in both copper prices and equity markets in China and the U.S.

Economic data indicate that U.S. inflation remains elevated while the labor market continues to demonstrate resilience. The long-term inflationary impact of geopolitical factors remains uncertain. As a result, expectations for Federal Reserve rate cuts have weakened, while the likelihood of further tightening has increased, supporting a recovery in the U.S. Dollar Index.

Meanwhile, Kevin Warsh has assumed the position of Federal Reserve Chair. His policy approach emphasizes balance sheet reduction to strengthen confidence in the U.S. dollar and reinforce expectations of long-term inflation control, potentially creating room for future rate cuts. Markets generally expect the Fed to leave interest rates unchanged in June.

Tight Copper Concentrate Supply Continues

The shortage of copper concentrate remains a key bullish factor. In addition, the delayed restart of production at the Grasberg mine has further squeezed copper concentrate treatment and refining charges (TC/RCs). According to SMM data, imported copper concentrate treatment charges have fallen rapidly to below negative USD 100/mt.

The combination of shrinking treatment charges and restrictions on certain by-product exports is increasing pressure on smelters and highlighting the growing impact of tight concentrate supply.

Although the relatively high price spread between refined copper and scrap copper has encouraged the use of recycled materials, the supply of tax-compliant scrap copper remains constrained. In Guangdong, scrap copper invoice premiums have reached elevated levels, limiting the effectiveness of raw material replenishment.

Regarding blister copper, SMM surveys show that the weekly operating rates of domestic scrap-copper anode producers declined in May compared with March and April. Due to favorable recycling policies, tax-compliant scrap copper remains in short supply. While the refined-scrap copper price spread remains wide, it has not generated sufficient substitution demand.

Looking ahead, raw material shortages may further pressure copper concentrate treatment charges during June.

Smelter Profitability Under Pressure

Since May, the suspension of ordinary sulfuric acid exports has taken effect. Sulfuric acid FOB export prices in major producing regions such as Shandong, Guangxi, and Anhui have shown signs of decline, with Shandong experiencing the largest price drop.

Combined with seasonal weakness in fertilizer demand, export restrictions are likely to exert further downward pressure on sulfuric acid prices. Smelters are facing a difficult environment characterized by increasing losses in concentrate processing and shrinking sulfuric acid profits, which may lead to more maintenance shutdowns in the coming months.

Demand Remains Mixed

Since March, the wire and cable industry has remained relatively subdued, with operating rates hovering around 70%-75%.

Although tight scrap copper supply has widened the refined-scrap copper price spread, substitution remains limited. Operating rates among recycled copper rod producers remain low, while refined copper rod producers have seen operating rates decline since April, suggesting weakening consumption momentum.

In June, the wire and cable sector is expected to maintain conditions similar to those seen in May. Inventories of copper rod products remain relatively ample, limiting the sector’s ability to significantly boost demand for refined copper under stable end-user consumption conditions.

Should copper prices rise substantially in June, scrap copper substitution may increase.

According to ChinaIOL forecasts, domestic air-conditioner sales entered a downward cycle during the second quarter of 2026, implying lower copper consumption from the air-conditioning sector in June.

On the other hand, the automotive industry remains in a recovery phase. The positive performance of cathode materials, copper foil for lithium batteries, and power batteries continues to support strong demand. Copper consumption from the electric vehicle and battery sectors is expected to remain robust.

Outlook

Despite some weakness in traditional consumption sectors, ongoing supply-side constraints, tightening copper concentrate availability, shrinking smelter profitability, and continued growth in new-energy demand are likely to provide support to the market.

Overall, copper prices are expected to maintain an upward trend, with a higher probability of further gains in the coming period.