[SMM Analysis] September Copper Prices Rebound, Is There Still Room for Growth in October?

After bottoming out and rebounding in September, copper prices surged 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 favored copper prices below 72,500 yuan/mt, actively purchasing at 71,500-72,500 yuan/mt, halting the price decline. As the Mid-Autumn Festival approached, downstream stocking sentiment remained strong, with copper cathode fundamentals actively destocking. The macro front was largely confirmed 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. From September 24, China's market frequently released positive news, with the A-share market soaring, and copper prices followed suit. However, after rising at the end of the month, fundamental consumption was suppressed, and stocking sentiment for the National Day was weaker than expected, with post-holiday consumption performance disappointing.

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, the smelter incident has not yet had a significant and 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, with production cuts also 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, due to rising copper prices affecting October downstream consumption, as of October 10, 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. The National Day holiday in October, along with rising copper prices at the end of September, 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's macro policies continued to release favorable news, with the A-share market jumping initially and then pulling back post-holiday. The copper market remained relatively calm, with bulls cautiously taking profits, but strong support remained below. LME copper is expected to reach $10,000/mt at high levels, and SHFE copper is likely to break through 80,000 yuan/mt again.