Copper futures displayed resilience on Monday, with the benchmark Shanghai contract maintaining a firm footing as spot market premiums remained at historically high levels. The persistent tightness in available spot supply continues to provide solid underlying support for prices.

On August 31st, the main Shanghai copper contract opened at 109,200 yuan per tonne and settled at 109,100 yuan per tonne, up 0.18% from the prior session’s close. During overnight trading, the contract opened at 109,100 yuan and closed at 109,350 yuan, gaining 0.62% compared to the afternoon settlement. Spot premiums for SMM 1# copper cathode against the September contract widened to 550-670 yuan per tonne, averaging 610 yuan, an increase of 75 yuan from the previous trading day. The London Metal Exchange remained closed for trading.

The September contract initially dipped to 108,550 yuan before rebounding, climbing to an intraday high of 109,270 yuan by midday and closing at 109,150 yuan. The month-to-month backwardation stood at 500-600 yuan per tonne. Market sentiment indicators improved, with selling and purchasing sentiment scores both moving higher, reflecting tighter available liquidity. Early session saw divergent quotes among holders that later converged, with available cargo remaining persistently scarce.

Looking ahead, the wide backwardation and constrained supply are expected to support spot premiums, with holders showing strong intentions to hold prices firm. However, elevated premiums are dampening downstream purchasing activity, with transactions largely driven by immediate needs. September restocking expectations form a bottom-line support. Spot premiums are likely to remain at high levels with limited room for further upside, settling into a high-level range-bound pattern.

**Macro and geopolitical backdrop**

US President Trump indicated that any strike against Iran would be limited in scope, noting that the situation in the Strait of Hormuz remains stable and that substantial oil volumes continue to flow through the waterway. He reiterated that interest rates are too high but expressed deep respect for Federal Reserve Chair Warsh. Treasury Secretary Bessent stated that US sanctions are exerting economic pressure on Iran’s regime, prompting military responses. He affirmed continued pressure but suggested Iran’s economy need not collapse, urging the regime to adopt a more rational approach. Bessent declined to speculate on Fed actions and denied attempts to influence bond markets, while expressing confidence that Japanese authorities would take measures to support yen appreciation.

**Mining sector developments**

Argentina and Chile have resumed a cross-border mining integration framework, advancing the legal and regulatory structure under the 1997 Mining Integration and Complementarity Treaty, which was reactivated in July. This initiative aims to unlock billions of dollars in mining investment by enabling companies to share infrastructure and resources across the Andes. Officials from both countries recently approved operating agreements for three cross-border projects—Vicuña, NexoAndino, and Filo Sur—spanning Argentina’s San Juan province and Chile’s Atacama region. Under the leadership of Chile’s President Jose Antonio Kast and Argentina’s President Javier Milei, both governments are seeking to attract private investment. Chile’s Mining Minister Daniel Mas indicated the framework could unlock over $20.7 billion in investment and boost annual copper output by 540,000 tonnes. For investors, access to Chilean ports and the world’s largest copper industry infrastructure represents a key attraction, offering reduced costs, shorter transport routes, and faster project development.

**Smelting, imports, and inventory**

Shanghai Futures Exchange data shows that copper inventories declined sharply in the week ending August 28th, dropping 19.12% to 72,428 tonnes—a two-year low. Import arrivals were limited, and downstream bargain-hunting combined with faster inventory turnover drove the drawdown. International copper inventories edged up by 1,329 tonnes to 17,223 tonnes. LME data reveals that after accumulating above 240,000 tonnes, copper inventories reversed lower last week to 234,275 tonnes, with the cancelled warrant ratio improving. Meanwhile, COMEX copper inventories continued their upward trend, reaching a record 753,640 short tons.

Zhongjin Gold released its 2026 interim report on August 27th. The company’s operations span geological exploration, mining, smelting, and sales of gold, copper, and other non-ferrous metals, with core products including gold series and cathode copper. During the reporting period, the company produced 9.14 tonnes of mined gold and 38,400 tonnes of mine copper, roughly flat year-on-year. Due to systematic maintenance at the Zhongyuan smelter, smelted gold production fell 15.16% to 16.39 tonnes, while electrolytic copper output declined 2.22% to 199,400 tonnes. Despite lower smelting volumes, higher international and domestic gold and copper prices, coupled with optimized production scheduling and cost controls, generated 167 million yuan in cost savings and efficiency gains. The company also intensified exploration efforts, adding 14.38 tonnes of gold resources in the first half, strengthening its resource base. The strong earnings performance was driven primarily by margin expansion from higher product prices and operational efficiency improvements rather than volume growth, showcasing resilience across cycles.

**Demand outlook**

End-user demand has yet to show substantive seasonal recovery, with the market in a typical transition from off-season to peak season. Downstream sectors such as cables, wires, and enameled wire are relying on existing order backlogs for production, while new orders remain suppressed by high copper prices. Companies are adopting just-in-time purchasing strategies with cautious restocking, showing limited willingness to build inventories voluntarily. Although the refined-vs-scrap copper price spread has widened temporarily, constraints from scrap copper invoice costs have limited substitution effects. Regenerated copper rod producers see limited order growth, with the price spread benefit flowing mainly to refined copper rod producers. While resumption of operations at large processing plants in Guangdong has boosted local off-take, nationwide terminal consumption improvement remains modest. The decline in domestic inventories primarily reflects insufficient supply-side replenishment rather than a broad strengthening of end demand.

Looking into next week, the traditional "golden September" period begins, but elevated copper prices remain the key constraint on end users. Large-scale concentrated restocking is unlikely in the near term, with terminal demand expected to remain need-based. Key focus areas include grid investment, new energy supply chain order fulfillment, and whether copper price corrections might trigger downstream inventory building. If prices persist at lofty levels, peak-season demand realization could be further delayed. Attention should also remain on invoice cost impacts on the recycled copper segment.

**Inventory and warrant data**

LME warrants declined by 1,300 tonnes to 234,275 tonnes, while SHFE warrants fell by 1,122 tonnes to 30,340 tonnes. Domestic electrolytic copper spot inventories stood at 102,100 tonnes on August 31st, down 7,400 tonnes from the prior week.

**Strategy**

Copper: Cautiously bullish. The Jackson Hole symposium delivered a hawkish tone, with renewed US inflation stickiness raising rate hike expectations. Copper prices saw a pattern of initial gains followed by declines, with late-week recovery amid macro fluctuations. Domestically, low inventories continue to support elevated spot premiums, although "golden September" terminal demand has yet to meaningfully commence. Downstream buyers are primarily purchasing on a need basis, while scrap copper substitution remains constrained by tax point issues. Copper concentrate treatment charges remain in negative territory, with raw material supply staying tight. Macro factors will continue to dominate next week, with close attention on US non-farm payroll data and domestic peak-season demand realization. The recommendation remains to establish hedge positions on price dips within the 107,400-107,900 yuan per tonne range.

Arbitrage: Hold. Options: Sell puts.

**Risk warnings**

Liquidity shock risks in overseas markets.