Domestic Inventory Turning Point Approaching: What Lies Ahead for Copper Prices Amid Trade Uncertainty? [SMM Commentary]

SMM February 28 News:

US President Trump ordered an investigation into copper imports, with the results to serve as the basis for imposing new tariffs. Trump reiterated that the 25% tariff on goods from Canada and Mexico would take effect on March 4. On February 26 local time, Trump stated that he is expected to soon announce additional tariffs on EU goods... Trump's aggressive tariff measures have drawn strong responses from multiple countries. Market concerns over global trade conflicts have intensified. Under the shadow of trade uncertainties, copper prices fluctuated downward this week. As of 16:28 on February 28, LME copper fell 0.37% to $9,355/mt, with a weekly decline of 2.13%. SHFE copper dropped 0.25% to 76,840 yuan/mt, with a weekly decrease of 0.65%.

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Fundamentals

This Week's Weekly Inventory Growth Has Significantly Slowed

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Domestic Inventory: As of Thursday, February 27, SMM's copper inventory in major regions across China increased slightly by 2,100 mt from Monday to 376,100 mt, up 18,500 mt WoW and 210,300 mt compared to pre-Chinese New Year levels. This week's inventory growth has significantly slowed, and attention will focus on whether destocking occurs next week. Specifically, Shanghai's inventory increased by 12,900 mt from Monday to 245,200 mt. Although arrivals of imported copper were limited, domestic copper arrivals were substantial, leading to continued inventory growth in this region. Jiangsu's inventory decreased by 6,200 mt to 55,300 mt, while Guangdong's inventory fell by 5,300 mt to 67,700 mt. Recently, consumption in these two regions has improved, coupled with reduced arrivals, resulting in a noticeable inventory decline. 》Click to View Details

Overseas Inventory: This week, both LME copper inventories and COMEX copper inventories experienced destocking. LME copper inventories stood at 262,075 mt on February 28, down 5,675 mt from 267,750 mt on February 21. COMEX copper inventories were 96,139 short tons on February 27, a decrease of 1,529 short tons from 97,658 short tons on February 20.

Copper Cathode Rod Enterprises Hope for Consumption Recovery in March Amid Inventory Pressure

Copper Cathode Rod: The weekly operating rate of major domestic copper cathode rod enterprises (2.21-2.27) slightly declined MoM and also showed a slight YoY decrease in the second week after the Lantern Festival, based on the lunar calendar. Although two weeks have passed since the Lantern Festival, end-use consumption and downstream enterprises' resumption of operations have fallen short of expectations. Downstream consumption remained weak YoY, and persistently high copper prices suppressed downstream enterprises' cargo pick-up speed. As month-end approached, inventory pressure on copper cathode rod enterprises increased instead of easing. Several enterprises scheduled maintenance and production cuts due to high inventory levels. However, some top-tier enterprises continued production to consume raw material inventories, resulting in only a slight decline in the weekly operating rate of copper cathode rod enterprises. While consumption has yet to show significant recovery due to copper price pressure, most enterprises still expect consumption to recover in March. 》Click to View Details

Outlook

Macro: Attention will focus on the upcoming release of China and US PMI data and the US January PCE data. Domestically, attention will be on the macro guidance from the Two Sessions next week and the potential release of import and export data. Recently, a series of weak US economic data has been released, indicating that US economic growth slowed in Q4 2024, with signs suggesting further cooling in early Q1 2025. Trump's tariff measures on major trading partners could exacerbate inflation and drag down US economic growth. Future attention will be on data such as the US February ISM Manufacturing PMI, US January factory orders MoM, US February unemployment rate, and non-farm payrolls to assess whether the US economy shows clear signs of slowing.

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Fundamentals: Looking ahead, SMM understands that next week's arrivals of imported copper will remain limited due to an unfavorable SHFE/LME price ratio and the closure of the import window. Conversely, the recent opening of the export window has prompted domestic smelters to prepare supplies for export, which will reduce domestic supply. On the demand side, with copper prices continuing to pull back and most factories resuming normal production in March, consumption is expected to improve compared to last week. Therefore, SMM expects a scenario of reduced supply and increased demand next week, with weekly inventories likely to fall back from highs.

In Summary: Macro: Focus on the macro guidance released during the Two Sessions. Multiple US economic data points will be released next week. If US employment data underperforms, concerns over a slowing US economy may intensify, further raising concerns about consumption demand prospects and putting pressure on copper prices. Trump's aggressive tariff measures have reignited market concerns over global trade conflicts. Attention should be paid to information related to copper tariffs. If the US signals additional tariffs on copper, caution is needed regarding its potential impact on copper prices. Fundamentals side, copper concentrate TC weekly transactions fell below $10/mt, and suppliers hold a tight supply outlook for the future, providing strong support for copper prices. Additionally, domestic smelters' export plans are gradually being finalized, and a turning point in domestic inventory may soon emerge. The market currently holds strong expectations for growth in March's copper end-use consumption. Future attention will focus on the boost to copper consumption growth from sectors such as power grids, home appliances, and automobiles. Before the inventory turning point appears, high domestic copper inventories will continue to weigh on copper prices in the short term.

Institutional Insights

China Fortune Futures Analysis: On the 28th, the stock market plunged, and copper prices fell below the 77,000 yuan mark in the afternoon, remaining weak in the short term. Although aluminum rebounded during the session, the momentum was limited. Attention will be on February's manufacturing PMI tomorrow morning. Next week, the Two Sessions will convene in China, and industrial products like copper and aluminum will require more macro guidance.

Guotou Futures pointed out: On Friday, SHFE copper fluctuated downward to below 77,000 yuan, as the market digested news of potential additional US tariffs on China. Evening attention will focus on US PCE data. The country's Q4 GDP growth slowed, and risks of continued weakness this quarter are high. Copper prices fluctuated at highs, with more emphasis on the effectiveness of lower support levels, such as the 76,500-76,000 yuan range.

Bank of America stated that it is optimistic about copper and silver prices, forecasting copper prices to reach $12,000/mt by 2027 and silver prices to hit $41.5/oz by 2026.

Goldman Sachs expects copper prices to rise above $10,500/mt in Q1 2026 but remain capped below $11,500/mt.

Citi's latest report predicts copper prices will drop by about 10% over the next three months, falling to $8,500/mt by early April when US import tariffs begin to impact the spot market. The bank's analysts set a 0-3 month target price at $8,500 but noted that copper prices could remain near current levels until April.

Recommended Reading:

》Unexpected Tariff Policies and Weak US Consumption Guide Copper Futures Downward [SMM Macro Weekly Review]

》National Copper Inventory Increased by Only 2,100 mt This Week [SMM Weekly Data]

》High Copper Prices Weigh on Copper Cathode Rod Weekly Operating Rates; Enterprises Hope for March Consumption Recovery Amid Inventory Pressure [SMM Copper Cathode Rod Weekly Review]

》Indonesia's Copper Concentrate Export Permit Approval Imminent: Can Distant Water Quench Immediate Thirst? [SMM Copper Concentrate Spot Weekly Review]

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