Trump Initiates Tariff Investigation on Copper Amid Chile's Worst Power Crisis in Nearly a Decade [SMM Copper Morning Meeting Summary]

Futures Market: Overnight, LME copper opened at $9,488.5/mt, rose to an intraday high of $9,528/mt in early trading, then declined steadily, hitting an intraday low of $9,385/mt near the close, and finally settled at $9,395/mt, down 1.13%. Trading volume reached 23,000 lots, and open interest stood at 294,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 77,200 yuan/mt, climbed to a high of 77,590 yuan/mt in early trading, then fluctuated downward, hitting a low of 76,550 yuan/mt near the close, and finally settled at 76,680 yuan/mt, down 0.69%. Trading volume reached 47,000 lots, and open interest stood at 168,000 lots.
[SMM Copper Morning Brief] News: (1) On February 26, Trump ordered a new investigation into potential tariffs on copper imports to rebuild US copper production. Copper is critical for EVs, military hardware, semiconductors, and various consumer goods. Trump signed an order directing Commerce Secretary Lutenick to initiate a new national security investigation under Section 232 of the 1962 Trade Expansion Act. During his first term, Trump used the same law to impose a 25% global tariff on steel and aluminum.
(2) On Tuesday local time, Chile experienced its most severe power crisis in nearly a decade, with 26 administrative regions nationwide plunged into darkness from north to south. The capital Santiago's metro system was paralyzed, leaving about 3 million commuters stranded, while emergency vehicle sirens echoed throughout the night. Power outages in the northern major copper mining regions directly impacted the global metals market.
Spot Market: (1) Shanghai: On February 25, mainstream standard-quality copper spot prices against the front-month contract were quoted at a discount of 140-130 yuan/mt, and high-quality copper at a discount of 120-100 yuan/mt. Market buying was sluggish during the day, but it was observed that the SHFE copper 2405 contract's forward structure had shifted to a backwardation structure. Suppliers were waiting for an inventory turning point and were not in a hurry to sell. Spot premiums are expected to stabilize tomorrow.
(2) Guangdong: On February 25, Guangdong #1 copper cathode spot prices against the front-month contract were quoted at a discount of 80-0 yuan/mt, with an average discount of 40 yuan/mt, flat from the previous trading day. Hydro copper was quoted at a discount of 190-150 yuan/mt, with an average discount of 170 yuan/mt, up 30 yuan/mt from the previous trading day. The average price of Guangdong #1 copper cathode was 76,945 yuan/mt, down 145 yuan/mt from the previous trading day, while hydro copper averaged 76,815 yuan/mt, down 115 yuan/mt. Overall, copper prices and inventories both declined, but downstream purchase willingness remained weak, with spot premiums rising initially but falling later.
(3) Imported Copper: On February 25, warehouse warrant prices were $34-46/mt, QP March, with the average price flat from the previous trading day. B/L prices were $48-60/mt, QP March, with the average price also flat. EQ copper (CIF B/L) was quoted at $0-8/mt, QP March, with the average price unchanged, referencing cargoes arriving in early to mid-March. As the backwardation structure between March and April dates widened again, some suppliers actively sold near-month B/Ls and warrants, but buyer purchase willingness was weak, making transactions scarce in the market.
(4) Secondary Copper: On February 25, secondary copper raw material prices fell by 100 yuan/mt MoM. Guangdong bare bright copper prices were 70,600-70,800 yuan/mt, down 100 yuan/mt from the previous trading day. The price difference between primary metal and scrap was 1,727 yuan/mt, down 100 yuan/mt MoM. The price spread between primary and secondary copper rods was 860 yuan/mt. According to the SMM survey, regarding the implementation progress of "reverse invoicing," some regions in Anhui have begun gradually requiring enterprises to implement the "reverse invoicing" process. However, enterprises indicated that the implementation process still requires time to adapt, and no consensus has been reached with upstream suppliers on procurement prices.
(5) Inventory: On February 25, LME copper cathode inventory decreased by 525 mt to 266,700 mt. On the same day, SHFE warrant inventory decreased by 1,074 mt to 152,692 mt.
Prices: Macro side, Trump introduced the latest measures that could reshape global supply chains, directing the Commerce Department to study tariffs on imported copper. The countries most affected would be Chile, Canada, and Mexico, intensifying market concerns. Additionally, weak economic data from the US and Germany heightened fears of slowing energy demand, while some countries indicated potential increases in oil production, pushing oil prices to a two-month low and dragging copper prices down. Fundamentals side, supply side, as the SHFE copper 2405 contract's forward structure shifted to a backwardation structure, suppliers were mostly waiting for an inventory turning point and were not in a hurry to sell. Demand side, downstream buying interest remained weak, coupled with fluctuating copper prices, leading to significant market caution and poor overall demand. In terms of prices, tariff threats continued to loom over the market, but Tuesday's widespread power outage in Chile's copper mining regions provided some support to fundamentals. Copper prices are expected to have limited downside today.