Social Inventory Depletion Supports Copper Prices [SMM Copper Morning Meeting Summary]

Futures: On Friday evening, LME copper opened at $9,844/mt, reaching a high of $9,884.5/mt at the start of the session, then fell straight to a low of $9,802/mt, and finally rebounded to close at $9,852/mt, down 0.59%, with trading volume at 18,000 lots and open interest at 294,000 lots. The most-traded SHFE copper 2505 contract opened at 80,530 yuan/mt, reached a high of 80,840 yuan/mt at the start of the session, then fell straight to a low of 80,190 yuan/mt, and finally rebounded to close at 80,630 yuan/mt, down 0.62%, with trading volume at 54,000 lots and open interest at 238,000 lots.

[SMM Copper Morning Meeting Summary] News: (1) Premier Li Qiang met with US Senator Daines and some American business representatives in Beijing, who were attending the 2025 China Development Forum. Li Qiang stated that there are no winners in a trade war. He hopes that the US will work more closely with China, communicating sincerely based on principles of mutual respect, peaceful coexistence, and win-win cooperation, deepening practical cooperation between the two countries, and promoting stable, healthy, and sustainable development of Sino-US relations. The US representatives said that American companies are actively participating in and supporting China's development, willing to continue investing in China, enhancing dialogue and cooperation, achieving mutual benefits, and striving to promote the continuous development of bilateral relations.

(2) The US has agreed to hold consultations with Canada and China separately at the World Trade Organization (WTO). The US delegation has notified China and Canada, preparing to conduct consultations with each under the WTO dispute settlement mechanism framework.

Spot: (1) Shanghai: On March 21, #1 copper cathode spot prices against the front-month 2504 contract ranged from a discount of 40 yuan/mt to a premium of 10 yuan/mt, averaging a discount of 15 yuan/mt, down 15 yuan/mt MoM. The price spread between futures contracts narrowed continuously last week, and the structure of the SHFE copper 2404 contract versus the 2405 contract quickly shifted to backwardation. In the spot market, the price difference between standard-quality copper and wet-process or non-registered copper significantly narrowed, with initial expectations of supply tightness being realized. It was expected that domestic social inventories would continue to decline, and premiums are likely to return above parity this week.

(2) Guangdong: On March 21, #1 copper cathode spot prices against the front-month contract ranged from 190 yuan/mt to a premium of 260 yuan/mt, averaging a premium of 225 yuan/mt, up 40 yuan/mt MoM. Overall, with inventories continuously declining, suppliers actively stood firm on quotes, but high prices led to poor actual transactions.

(3) Imported copper: On March 21, warrant prices were 65-75 $/mt, QP April, up 5 $/mt MoM; B/L prices were 91-105 $/mt, QP April, up 5 $/mt MoM; EQ copper (CIF B/L) prices were 30-40 $/mt, QP April, unchanged MoM, with quotations referencing shipments arriving in mid-to-late March and early April. Spot transactions were scarce on Friday, with active inquiries among traders but limited available supplies. A few far-month B/L offers were reported at high levels, and market liquidity tightened.

(4) Secondary copper: On March 21, secondary copper raw material prices remained unchanged MoM. Guangdong bare bright copper prices were 74,000-74,200 yuan/mt, unchanged MoM. The price difference between primary metal and scrap was 2,235 yuan/mt, down 445 yuan/mt MoM. The price difference between refined and scrap rods was 1,835 yuan/mt. According to the SMM survey, overseas imported copper scrap was affected by the expectation of tariffs on US copper scrap by Chinese customs. In January and February, US imports of copper scrap were 39,000 and 31,000 mt, respectively. With rising US refined copper prices, many domestic import traders' offers could not match local supplier prices, making Chinese bids almost uncompetitive in the overseas market. The inverted price spread also caused significant difficulties for many traders.

(5) Inventory: On March 21, LME copper inventories increased by 1,325 mt to 224,600 mt; SHFE warrant inventories decreased by 4,076 mt to 150,060 mt.

Prices: On the macro front, Fed officials indicated on Friday that they are not in a hurry to cut interest rates, leading to a rise in the US dollar index, which suppressed copper prices. However, concerns about Trump's trade policies impacting US economic growth, along with expectations of two rate cuts by the Fed within the year, may continue to pressure the US dollar, supporting copper prices. Fundamentally, the price spread structure between the SHFE copper 2504 and 2505 contracts rapidly shifted to backwardation, with expectations of near-term supply tightness gradually being realized. As futures prices pulled back, downstream demand improved, and weekend restocking sentiment slightly warmed up, with domestic social inventories expected to continue to decline. Overall, changes in both supply and demand provided support for copper prices, but attention should be paid to the speed of inventory reduction and the sustainability of downstream demand. Regarding prices, the deadline for Trump's reciprocal tariffs is approaching, and the current tariff expectations still influence copper prices. Focus should be on changes in US economic data. Under the resonance of macro and fundamental factors, it is expected that the downside for copper prices today is limited.

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[The above information is based on market data collection and comprehensive assessment by the SMM research team. The information provided is for reference only and does not constitute direct investment research advice. Clients should make prudent decisions and not rely solely on this information. Any decisions made by clients are unrelated to SMM.]