Copper Prices Rose This Week as Year-End Effect Emerged; "Trump Trade" Stirred Up Turbulence—How Far Can It Drive Copper Prices? [SMM Commentary]

SMM January 10 News:

At the beginning of this week, the US dollar index pulled back to around 108 before rising above 109 again. Copper inventories experienced destocking this week. As market concerns over tariffs and protectionist policies under Trump's administration intensified, investment sentiment became more diversified, leading to a synchronized rally in the capital markets for the US dollar, precious metals, and bulk commodities like copper. Supported by fundamentals and the influx of arbitrage funds, copper prices rose this week. As of 17:41 on January 10, LME copper increased by 0.38% to $9,113/mt, with a weekly gain of 2.66%. SHFE copper rose by 0.78% to 75,270 yuan/mt, with a weekly increase of 3.08%.

》Click to view SMM Futures Data Dashboard

Fundamentals

SMM Copper Inventories in Major Regions of China End Two Consecutive Weeks of Increase

》Click to view SMM Metal Industry Chain Database

Domestic Inventory: As of Thursday, January 9, SMM copper inventories in major regions of China decreased by 10,100 mt from Monday to 105,700 mt, down by 8,600 mt compared to last Thursday, ending two consecutive weeks of increase. Compared to Monday, inventories in most regions declined, with only Jiangsu showing a slight increase. Total inventory was 33,700 mt higher YoY than the 72,000 mt recorded last year. Specifically, Shanghai's inventory decreased by 7,800 mt from Monday to 76,200 mt due to reduced arrivals of imported copper and limited domestic copper arrivals, leading to a significant decline in inventory. Jiangsu's inventory increased by 1,400 mt to 19,500 mt as weaker northern consumption redirected shipments to Jiangsu. Guangdong's inventory decreased by 1,000 mt to 6,000 mt due to fewer arrivals and moderate downstream consumption, as reflected in the continuous rise in Guangdong's daily outflows from warehouses. 》Click to view details

LME Copper Inventories: LME copper inventories stood at 264,425 mt on January 10, down by 5,375 mt compared to 269,800 mt on January 3.

COMEX Copper Inventories: COMEX copper inventories were 96,021 short tons on January 9, up by 2,694 short tons compared to 93,372 short tons on January 2.

Year-End Effect Weakens Copper Cathode Rod Orders; Wire and Cable Enterprises See Operating Rates Decline More Than Expected

Copper Cathode Rod: The weekly operating rate of major domestic copper cathode rod enterprises (January 3-9) rebounded as expected, with a significant MoM increase. Entering 2025, copper cathode rod enterprises resumed production this week after eliminating the impact of New Year's Day maintenance. Looking ahead, most copper cathode rod enterprises reported that their orders on hand could sustain operations until the end of next week, but new orders are gradually weakening as the year-end approaches. 》Click to view details

Wire and Cable: This week (January 3-9), the operating rate of SMM wire and cable enterprises declined MoM. According to SMM, market demand accumulated before New Year's Day due to payment cycle issues has not been released after entering 2025. End-user procurement sentiment remained unenthusiastic, with most downstream enterprises unwilling to allocate significant funds for cable purchases before the Chinese New Year. As a result, new orders for wire and cable enterprises are gradually decreasing, showing seasonal weakness overall. 》Click to view details

Outlook

Macro: Domestically, next week will focus on China's import and export data, the annual GDP growth rate for 2024, the YoY growth rate of industrial output above designated size for December, the YoY growth rate of total retail sales for December, and press conferences by the State Council Information Office on "China's High-Quality Economic Development Achievements" and the national economic performance. Internationally, attention will be on US CPI and PPI data, initial jobless claims for the week ending January 11, and potential market disruptions from Trump's remarks as his inauguration date approaches.

Fundamentals: Looking ahead, imported copper arrivals are expected to increase next week, while smelter shipments are unlikely to rise significantly, leading to a slight increase in total supply compared to this week. On the consumption side, as the Chinese New Year holiday approaches, some downstream end-user enterprises will gradually begin their holiday from the end of next week, likely resulting in lower consumption next week compared to this week. Therefore, SMM expects a scenario of increasing supply and decreasing demand next week, with weekly inventories potentially rising again. LME copper inventories experienced destocking this week, and attention will focus on whether this trend can continue next week. COMEX copper inventories showed an overall increase this week, and with arbitrage positions entering both markets, the price spread between the two is expected to gradually narrow, potentially leading to further growth in COMEX copper inventories.

In Summary: Multiple significant macroeconomic data releases are scheduled for next week, which will help assess domestic and international economic conditions and provide insights into copper consumption prospects. Trump's inauguration on January 20 and his proposed tariff and protectionist policies have recently had frequent impacts on the metals market. The market should remain cautious about the fluctuating "Trump trade" sentiment. Intensive macro data and news are expected to dominate copper price trends next week. From a fundamentals perspective, as the year-end effect becomes more apparent, some downstream end-user enterprises will begin their Chinese New Year holidays, leading to a gradual weakening of downstream consumption. Copper inventories may increase again, reducing their support for copper prices. On the capital side, uncertainties surrounding the potential impacts of Trump's policies persist. COMEX has become the preferred choice for speculative capital in US commodities. The price spread between LME copper and COMEX copper widened to over $600/mt during Friday's session. Speculative sentiment remains in the market, and the continued rally in overseas markets is expected to provide short-term support for copper prices. However, considering that COMEX copper inventories remain at a high level of 90,000 short tons, this will ultimately limit the upside for COMEX copper.

Institutional Views:

Citi predicts that copper prices will pull back to $8,500/mt in Q1 2025. Copper prices are expected to soften due to economic growth headwinds from uncertainties surrounding US tariff policies and rising debt burdens in developed markets. Citi maintains a neutral to bearish outlook on industrial metals for 2025.

China Fortune Futures stated that SHFE copper rose by over 3% this week, recovering losses since mid-December. However, the rally was driven by short covering, inventory declines, low copper concentrate TCs, and resistance at the high level of the US dollar, supporting the copper price rebound. After SHFE copper recovered the 74,500-75,000 range this week, its short-term technical trend improved, with medium-term attention on the recovery of open interest.

Guotai Junan Futures reported that domestic markets are stocking up ahead of the holiday. Meanwhile, US copper prices showed unusual movements in response to US tariff risks, with the LME-COMEX price spread exceeding $400. The US imports over 800,000 mt of copper cathode annually, making it unlikely to impose direct import tariffs on such critical raw materials. Instead, attention should be paid to potential policy changes regarding US copper scrap exports. Evening focus will be on US non-farm payrolls data, with shorts temporarily holding their positions.