Report Industry Investment Rating - Copper: Cautiously bullish [9] Core Viewpoints - Recently, due to fluctuations in the market's expectations for the Fed's December interest rate cut and geopolitical factors in some regions, copper prices have declined. However, as copper prices fall, downstream procurement enthusiasm has increased. With more price-fixing by downstream enterprises, some short-selling hedging positions in the processing sector have been closed, providing support for copper prices at the 85,000 yuan/ton level. Currently, one can buy hedging on dips between 85,000 yuan/ton and 85,500 yuan/ton and sell hedging above 89,000 yuan/ton [9] Summary by Directory Market News and Important Data - **Futures Quotes**: On November 26, 2025, the main Shanghai copper futures contract opened at 86,750 yuan/ton and closed at 86,590 yuan/ton, a -0.01% decline from the previous trading day's close. The night session opened at 87,200 yuan/ton and closed at 87,090 yuan/ton, a 0.46% increase from the afternoon close [2] - **Spot Situation**: According to SMM, the spot price of SMM 1 electrolytic copper was at a discount of 10 yuan/ton to a premium of 170 yuan/ton against the 2512 contract, with an average premium of 80 yuan/ton, unchanged from the previous day. The spot price range was 86,510 - 86,800 yuan/ton. The import loss for the current month narrowed to about 800 yuan/ton, and the inter-month spread was in a C structure of 30 - 60 yuan/ton. It is expected that today's copper price will remain around 86,500 yuan/ton, and the spot premium is unlikely to rise significantly [3] - **Important Information Summary**: The Fed's Beige Book shows that economic activity has been basically flat since the last report in most of the 12 Fed districts. Two districts reported a slight economic decline, and one reported a slight increase. The overall outlook remains unchanged, and some people point out that the risk of economic slowdown in the next few months has increased. In the job market, the number of initial jobless claims in the US last week decreased by 6,000 to 216,000, the lowest since mid-April, lower than the expected 225,000. The number of continued jobless claims in the previous week increased slightly to 1.96 million [4] Mining - At the 2025 World Copper Conference (Asia), the head of the Chilean Mining Association stated that Chile accounts for 23% of global copper production, and about 55% of its copper is exported to China. Three measures are crucial for boosting the industry in the short term: raising the mining limit for small mines, differentiating medium-sized mining project types, and temporarily increasing production capacity by 20% for 5 years [5] Smelting and Import - The China Nonferrous Metals Industry Association opposes zero or negative processing fees in the copper smelting industry and calls on the global copper industry to address this "unsustainable structural contradiction." China is curbing overexpansion by halting about 2 million tons of illegal capacity and will prioritize the development of new smelting capacity using scrap rather than imported copper concentrates in the future. Chile's state-owned copper company Codelco has significantly increased the copper supply premium for Chinese and South Korean customers in 2026, which will push up import costs and pressure downstream processing enterprise profits [6] Consumption - In October, China's copper tube imports were 1,155.1 tons, a 41.31% month-on-month increase and an 8.37% year-on-year decrease. Cumulative imports were 15,585.2 tons, a 10.77% cumulative year-on-year decrease. Exports were 25,287.9 tons, a 2.33% month-on-month decrease and an 18.57% year-on-year decrease. Cumulative exports were 309,326.6 tons, a 0.16% cumulative year-on-year increase [7] Inventory and Warehouse Receipts - LME warehouse receipts changed by 825 tons to 156,500 tons compared to the previous trading day. SHFE warehouse receipts changed by -1,140 tons to 39,825 tons. On November 26, the domestic electrolytic copper spot inventory was 180,600 tons, a decrease of 13,900 tons from the previous week [8] Strategy - **Copper**: Cautiously bullish. Buy hedging on dips between 85,000 yuan/ton and 85,500 yuan/ton and sell hedging above 89,000 yuan/ton [9] - **Arbitrage**: On hold - **Options**: Short put

Core Viewpoint - The China Nonferrous Metals Industry Association has expressed strong opposition to the phenomenon of zero or negative processing fees in the copper smelting industry, calling it an "unsustainable structural contradiction" that harms the interests of the global copper smelting sector, including China [1][2]. Industry Response - The association's vice president, Chen Xuesen, emphasized the dangers of negative processing fees, urging the global copper industry to confront this issue and promote cooperation among relevant countries and stakeholders [2]. Capacity Management - China is taking measures to manage copper smelting capacity by halting approximately 2 million tons of illegal capacity to curb excessive expansion, with these capacities either under construction or in planning stages [3]. Future Development - In the coming years, China will prioritize the development of new smelting capacity that utilizes scrap materials instead of importing copper concentrate, aiming to reduce reliance on imports and alleviate overcapacity pressures [4]. Market Dynamics - The decline in processing fees to historical lows is attributed to a structural imbalance between raw material shortages and excess smelting capacity, with spot processing fees dropping to extreme levels, raising concerns about industry sustainability [4]. - Global copper smelting companies are facing the impact of low processing fees, with companies like Japan's JX Advanced Metals announcing production cuts and Glencore's Mount Isa smelter receiving government support to maintain operations [4]. Long-term Negotiations - Analysts believe that the current pressure on processing fees is unlikely to change fundamentally in the short term, as the market awaits the upcoming 2026 long-term contract negotiations to establish a more sustainable pricing mechanism [7]. - The core issue of the negotiations will be whether the long-standing benchmark system can continue to be applicable, with expectations of further adjustments to the annual benchmark system and a shift towards more diverse and complex negotiation formats [7].