SHFE copper lacks rebound momentum

Impact of US Tariff Policies Gradually Emerges

As downstream consumption gradually recovers, the operating rates of copper downstream processing enterprises have significantly increased. However, the impact of US tariff policies is gradually emerging, making it difficult to be optimistic about the subsequent copper consumption.

Since April, the most-traded SHFE copper contract has formed a trend of first declining and then rising, with prices gradually rebounding after hitting a low of 71,000 yuan/mt. Meanwhile, arbitrage trading in the LME and COMEX copper markets has weakened, while domestic copper smelter maintenance has increased, and social inventory of copper has rapidly decreased, providing support for copper prices. How much room is there for copper prices to rebound subsequently?

Supply Side Remains Tight

In December 2024, China's copper concentrate production was 151,800 mt, up 6.89% YoY and 9.51% MoM. In March 2025, China imported 2.3939 million mt of copper concentrates and ore in physical terms, up 9.69% MoM and 2.73% YoY. This year, China's copper concentrate production has been at a relatively low level, while imports have remained relatively stable, resulting in a decrease in the overall supply of copper concentrates. In late April, Peru's Antamina mine fully suspended operations due to a sudden accident. In 2024, the mine's copper production was 426,900 mt, accounting for 1.86% of the global total copper mine production, which will have a certain impact on the global copper ore supply.

In terms of inventory, as of April 18, the copper concentrate inventory at domestic mainstream ports was 706,900 mt, at a medium level. Meanwhile, the processing fee for imported ore continued to decline, falling to -$34.71/mt, hitting a record low. In addition, according to data from relevant institutions, the global new copper concentrate capacity additions accelerated from 2021 to 2025. However, in the three years after 2026, the growth rate of global new copper concentrate capacity will rapidly decline, potentially exacerbating the tight supply of global copper concentrates in the later period.

As of February this year, China's copper scrap production was 115,800 mt in metal content, up 4.99% MoM and 60.83% YoY. According to March data, China's imports of copper scrap and shredded copper scrap were 189,700 mt in physical terms, down 3,631 mt (-1.88%) MoM and 13.07% YoY. Among them, imports from the US were 22,500 mt in physical terms, down 8,900 mt MoM. With the intensifying impact of Sino-US trade frictions, the volume of imported copper scrap may decline in the later period, leading to a tight supply-demand structure for copper scrap.

In February, China's blister copper production was 911,500 mt, down 2.96% MoM and up 10.74% YoY. Among them, mineral-derived blister copper decreased by 26,500 mt from January to 738,700 mt, while scrap-derived blister copper decreased by 1,300 mt to 172,800 mt. In March, China imported 50,200 mt of copper anode, down 11.05% MoM and 47.8% YoY.

In March, China's copper cathode production reached 1.1221 million mt, up 6.04% MoM and 12.27% YoY. Entering April, the supply of copper concentrates tightened, prompting some smelters to reduce their feedstock intake of copper concentrates. However, by increasing the intake of copper scrap and anode plates, they managed to maintain stable copper cathode production. Additionally, a new smelter in east China commenced operations, and the capacity utilization rate of smelters in southwest China increased, leading to a slight decline in the total copper cathode production.

Due to significant losses in the industry, the operating rate of domestic smelters remained relatively low, while import losses also suppressed the supply of imported copper. Overall, despite the increase in copper cathode production, the overall supply pressure remained relatively small. Looking ahead at capacity increments, it is expected that China will add 1.17 million mt of new copper refining capacity in 2025, with overseas capacity additions reaching around 870,000 mt. Among these, the Kamoa mining area, jointly held by Ivanhoe and Zijin Mining, will contribute the largest increase in overseas capacity.

Rebound in downstream operating rates

In 2025, China's fiscal policy will become more proactive. Specifically, the scale of ultra-long special treasury bonds is expected to increase from 1 trillion yuan to 2 trillion yuan, while the scale of new special local government bonds is expected to rise from 3.9 trillion yuan to 4.5 trillion-5 trillion yuan. With the continuous strengthening of fiscal policy, it is anticipated that infrastructure investment in 2025 will continue to fluctuate at highs in recent years, with investment growth expected to stabilize at 5%-10%. Infrastructure investment will remain one of the main driving forces for industrial product demand in 2025.

In December 2024, China's copper semis production reached 2.27 million mt, up 6.2% MoM and 16.53% YoY. The operating rate of China's copper semis industry in December 2024 was 69.02%. Affected by the Chinese New Year holiday, the operating rate of the copper semis industry was relatively low in January-February 2025 but gradually recovered to 67% in March. With the recovery of downstream consumption, the operating rates of downstream copper processing enterprises continued to rebound. Entering April, copper prices fell sharply, stimulating an increase in downstream orders. It is expected that the operating rate of the copper semis industry may continue to rise, but attention should be paid to the impact of US tariff policies on China's copper consumption. Additionally, the YoY data for overall power grid and NEV production both showed slight increases, providing further bullish support for copper cathode demand.

Bulls take the initiative in forward contracts

In April, the growth rate of COMEX copper inventories accelerated, approaching 130,000 short tons as of April 23. Domestically, as of April 24, China's social copper inventory stood at 181,700 mt, achieving eight consecutive weeks of weekly destocking. It fell by 195,300 mt from the year's high and was 223,000 mt lower than the 404,700 mt recorded in the same period last year. In April, the decline in LME copper inventories slowed, hovering around 210,000 mt, while the ratio of cancelled warrants dropped from a high of 50% to 37%.

As of April 18, both non-commercial long and short positions of COMEX No. 1 copper decreased compared to the previous week, with net long positions dropping by 4,764 lots to 19,477 lots. Meanwhile, LME copper investment fund long and short positions both increased, with net long positions rising by 1,479 lots to 29,842 lots. The domestic futures market exhibited a contango structure, with long positions in far-month contracts dominating, indicating bullish sentiment among major funds regarding future prices.

From the supply-demand balance table, as the peak consumption season approaches, downstream demand is rebounding while upstream supply is pulling back, leading to a gradual improvement in the supply-demand structure. The probability of a supply-demand gap in Q2 is increasing. Against this backdrop, market optimism is rising, providing some bullish support for prices.

From a macro perspective, the US economic data for March, including ISM Manufacturing PMI, CPI, and PPI, showed steady performance. The impact of US tariff policies is expected to be reflected in April's data, and subsequent attention should be paid to the progress of negotiations between the US and other countries.

On the supply side, the tight supply of copper raw materials has intensified, with import concentrate TC continuing to decline, and tariff policies affecting copper scrap imports. However, the current production cuts in copper smelting are relatively small, with April mainly focused on maintenance. By-products such as sulphuric acid and gold can partially offset smelter losses.

On the consumption side, as downstream consumption gradually recovers, the operating rate of downstream processing enterprises has significantly increased. The shortage of secondary copper raw materials has also stimulated market consumption of copper cathode. However, the impact of US tariff policies is gradually becoming apparent, making it difficult to be optimistic about future copper consumption.

Overall, the fundamentals of copper provide moderate support, but US tariff policies continue to trouble the market, limiting the rebound potential of copper prices. It is expected that SHFE copper prices may struggle to break new highs in May, with caution advised against the risk of jumping initially and then pulling back.

(Source: Futures Daily)