September copper futures bottomed out and rebounded; October policies are expected to provide further upward momentum

After copper prices bottomed out in September, they surged strongly at the end of the month. LME copper broke through $10,100/mt, and the most-traded SHFE copper contract rose above 79,000 yuan/mt. Early in the month, recession sentiment and institutions lowering their 2025 copper price forecasts led the market to be bearish on copper. However, end-use sectors preferred copper prices below 72,500 yuan/mt, leading to active purchasing between 71,500-72,500 yuan/mt, halting the price decline. As the Mid-Autumn Festival approached, downstream stocking sentiment remained strong, and the fundamentals of copper cathode continued destocking. The macro front was largely set with the US Fed's September interest rate cut and expectations of favorable macro policies from China, bringing copper prices back to around 74,000 yuan/mt. With the US Fed's interest rate decision of 5.00% on September 18, a 50bp cut exceeded market expectations, and the US dollar fell to around 100 points. From September 24, frequent positive news in the Chinese market led the A-share market to soar, and copper prices followed suit. However, after the late-month rise, fundamental consumption was suppressed, and stocking sentiment for the National Day was weaker than expected, with post-holiday consumption performing poorly.
In September, a major smelter in east China required long-term maintenance due to force majeure, providing more negotiation space in the ore market and increasing spot order demand for copper cathode in east China. However, so far, the smelter incident has not had a significant or long-term impact on the ore and spot copper markets. September SMM copper cathode production was 1.0043 million mt, 11,300 mt less than expected. Besides the above factors, there was also a reduction in production due to tight blister copper and copper anode supply. With reduced production and limited copper cathode imports, and unclear copper scrap policy impacts, coupled with downstream stocking during the Mid-Autumn and National Day holidays, China's copper cathode market saw significant destocking in September. Due to the earlier opening of the import window, LME Asian warehouse inventory continued destocking, accumulating nearly 20,000 mt. However, the rise in copper prices affected downstream consumption in October, and as of October 10, the LME copper 0-3 contango expanded to $140.14/mt.
Looking ahead to October, SMM expects China's copper cathode production to be 993,500 mt, down 10,800 mt MoM. October includes the National Day holiday, and the late September rise in copper prices led to an increase in holiday days for enterprises compared to last year, especially in south China. In the first week after the holiday, the increase in copper cathode social warehouse inventory was the highest in nearly six years, reaching 33,400 mt. High copper prices and inventory buildup pressured spot premiums. In October, China continues to release favorable macro policies, and after the holiday, the A-share market jumped initially and then pulled back, with the copper market relatively calm. Bulls cautiously took profits, but strong support remained below. LME copper is expected to run between $9,600-10,000/mt, and SHFE copper between 75,500-80,500 yuan/mt.