Copper Prices Rise for Two Consecutive Months on Monthly Chart: Will the "Trump Recession Trade" Weigh on Copper Prices? [SMM Outlook]

SMM March 11 News:

Although external macro factors frequently "shifted," domestic policy support expectations, combined with tight copper concentrate supply and the SMM Imported Copper Concentrate Index (monthly) dropping into negative territory, drove copper prices to close February with gains. LME copper ended February with a 2.88% increase, while SHFE copper rose 1.71%. Entering March, the macro sentiment from the Two Sessions turned positive; the market gradually entered the traditional consumption peak season, and domestic inventory reached a turning point. Additionally, a series of weak US economic data heightened concerns over a US economic slowdown, leading to a weakening US dollar index, which supported copper prices. However, market concerns over global economic growth, driven by fluctuating US tariff policies, reduced the preference for risk assets like copper, limiting its gains. As of 17:14 on March 11, LME copper rose 0.47% to $9,573.5/mt, with a monthly gain of 2.3% so far in March. SHFE copper fell 0.52% to 78,030 yuan/mt, with a monthly gain of 1.32%.

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Fundamentals

February Copper Concentrate Spot Transaction Center Continued to Decline; Imported Copper Concentrate Index (Monthly) Dropped into Negative Territory

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In February, the copper concentrate spot transaction center continued to decline. According to SMM quotes, the SMM Copper Concentrate Index (monthly) for February was -$9.14/mt, down $10.9/mt from January 2025.

February Copper Cathode Production Increased 4.38% MoM; March Production Expected to Hit a Record High

Domestic production: In February, SMM copper cathode production increased by 44,400 mt MoM, up 4.38%, and rose 11.35% YoY. February copper cathode production increased significantly as expected, mainly due to: 1. Smelters resuming normal production after January maintenance, boosting output; 2. Although copper concentrate TCs had fallen into negative territory, most smelters had stocked sufficient raw materials before the Chinese New Year, allowing normal production in February without being affected by low TCs (as of February 28, the monthly index for imported copper concentrate was -$9.14/mt, down $10.90/mt MoM). The unexpected production increase in February was due to: 1. A new smelter in southwest China starting production; 2. The capacity utilisation rate of a newly established smelter in Jiangxi province steadily improving.

Entering March, three smelters are scheduled for maintenance, but the impact on actual production is expected to be minimal, with some producers indicating that the maintenance impact will be reflected in April. Based on production schedules, SMM estimates that March domestic copper cathode production will increase by 42,000 mt MoM (up 3.97%) and 100,700 mt YoY (up 10.08%). 》Click to view details

February Copper Semis Operating Rate Declined Slightly MoM; March Copper Cathode Production Expected to Hit a Record High

Regarding copper semis operating rates, the long Chinese New Year holiday delayed production recovery for many enterprises until after the Lantern Festival (February 13), leading to a slight MoM decline in February operating rates.

Copper Cathode Rod: According to SMM, copper cathode rod operating rates declined MoM in February. Due to differences in the Chinese New Year calendar, operating rates increased YoY. As the festive atmosphere of the Year of the Snake faded, copper prices exceeded market expectations post-holiday, with SMM data showing the average price of SMM #1 copper cathode in February at 76,863.61 yuan/mt, up 1,840 yuan/mt MoM. However, tight secondary copper raw material supply post-holiday kept secondary copper prices firm, narrowing the price spread between copper cathode and secondary copper rods. SMM data showed that in February, the average price spread between secondary copper rods in Jiangxi and power rods in east China was 987 yuan/mt, narrowing by 231 yuan/mt MoM. Copper cathode rods maintained an economic advantage. Despite the narrowed price spread, high copper prices exceeding downstream psychological price levels suppressed post-holiday cargo pick-up, with only NEV and high-end product orders recovering well. Cable orders showed no significant improvement, and end-use consumption remained weak compared to the same period last year. Entering March, the US dollar index continued to decline, and copper prices rose amid tariff disturbances, fluctuating at highs. Elevated copper prices continued to suppress the release of new orders. 》Click to view details

Copper Pipe & Tube: According to SMM data, copper pipe & tube operating rates declined MoM in February but increased YoY. Large enterprises maintained high operating rates due to sufficient air-conditioning pipe orders during the Chinese New Year. Medium-sized enterprises were supported by export orders, keeping production relatively stable, though some smaller enterprises resumed production only after February 7, dragging down overall output. The installation pipe market remained mediocre, with weak export demand. For small enterprises, brass alloy pipe orders were weak due to the lackluster real estate market, and exports provided no support. Military white copper pipe orders were stable but contributed little to small enterprise operating rates. 》Click to view details

Copper Plate/Sheet and Strip: According to SMM, February 2025 copper plate/sheet and strip operating rates declined MoM but increased YoY (February 2024 was a Chinese New Year month). Operating rates in February were at relatively low levels in recent years, slightly below expectations. Specifically, fewer production days in February were the main factor affecting operating rates. Most enterprises were still on holiday in early February, gradually resuming production afterward. Post-holiday, copper prices exceeded market expectations, significantly affecting downstream order placement, especially for brass plate/sheet and strip, which recovered more slowly than copper plate/sheet and strip. Some enterprises noted that pre-holiday downstream stockpiling had partially offset February demand. Overall, February operating rates declined slightly MoM and were below expectations. Among order types, only NEV-related orders (auto parts, batteries, charging piles) and power-related orders (transformers, wires, cables) performed well. By late February, production had returned to normal levels. 》Click to view details

Copper Billet: According to SMM, February 2025 copper billet operating rates declined MoM. Despite robust post-holiday restocking demand in refrigeration, sanitary ware, and electromagnetic wire sectors, overall operating rates did not recover significantly due to: 1. The Chinese New Year holiday and fewer working days in February, with most enterprises operating only 15-20 days. Some large enterprises resumed production early, but downstream customers started late, limiting production pace. Enterprises reported capacity recovery rates of 80%-90% compared to the same period last year. 2. Tight raw material supply constrained operating rates. Global trade tensions reduced US supply, while high brass rejection rates and elevated prices in Europe dampened procurement willingness. Additionally, rising copper prices did not drive brass prices higher, reducing willingness to sell and further limiting raw material supply for copper billet enterprises. 》Click to view details

Inventory: Copper Inventory in Major Regions Dropped to 360,000 mt Inventory Turning Point Emerged

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SMM Copper Inventory in Major Regions: As of Monday, March 10, SMM copper inventory in major regions decreased by 8,000 mt WoW to 360,000 mt. Total inventory increased by 194,200 mt compared to pre-holiday levels of 165,800 mt. Notably, domestic copper inventory is now below last year's levels, indicating a turning point. Specifically, Shanghai inventory decreased by 1,000 mt WoW to 234,900 mt, Jiangsu inventory decreased by 600 mt WoW to 57,800 mt, and east China inventory declined slightly due to reduced arrivals of imported and domestic copper, with moderate consumption. Guangdong inventory decreased by 6,400 mt WoW to 59,600 mt, as arrivals dropped significantly and consumption improved.

Looking ahead, the opening of the export window is expected to increase exports and reduce imports, likely leading to a decrease in total supply this week. With the arrival of the production peak season, downstream consumption is gradually improving. SMM expects a supply reduction and demand increase this week, leading to continued inventory declines. 》Click to view details

Overseas Copper Inventory: LME copper inventory as of February 28 was 262,075 mt, up slightly from 256,225 mt on January 31. Entering March, LME copper inventory decreased by 9,150 mt to 244,175 mt as of March 11. COMEX copper inventory as of February 28 was 93,481 short tons, down 4,756 short tons from 98,237 short tons on January 31. Entering March, COMEX copper inventory continued to decline, reaching 92,472 short tons as of March 10.

Outlook

Looking ahead, on the macro front, global institutions remain bullish on Chinese assets, with multiple rallies in the domestic stock market driving up copper and other metals. Attention will focus on whether China's resilient assets can help copper prices break free from the "Trump recession trade." Key factors to watch include domestic social financing data, PMI data, and the release of consumption-specific action plans. Recently, weak US data and fluctuating US tariff policies have heightened concerns over a US economic slowdown, leading to frequent declines in the US dollar index and US equities. Key upcoming events include the US February PCE price index, March PMI data, the US Fed's March rate decision, and Powell's post-meeting remarks. Additionally, European PMI and inflation data, as well as the Bank of Japan's rate decision, will be monitored to assess the economic situation in Europe and Japan.

Fundamentals side, in terms of supply: Indonesia's new regulations allowing mining companies to export unprocessed ore under force majeure conditions and the DRC expediting copper concentrate shipments have eased concerns over tight copper ore supply. Regarding inventory: Domestic smelter export plans may drive domestic copper inventory destocking. With the arrival of the consumption peak season, domestic copper inventory is expected to continue destocking, though high copper prices may suppress downstream restocking pace. Attention will focus on whether the inventory turning point can persist.

In summary, domestic macro positivity will support copper prices, while the "Trump recession trade" will weigh on them. The market will monitor more US economic data to assess its impact on copper demand. On the fundamentals side, copper inventory destocking expectations will support prices, but eased concerns over tight copper concentrate supply will temporarily weaken this support. Attention will also focus on potential narrowing of SHFE copper structure changes and their impact on prices.

Institutional Comments

CITIC Securities' research report noted that recent expectations of escalating US copper import tariffs have pushed COMEX copper prices and their spread with LME prices to new highs. Strengthened tariff expectations may exacerbate short-term supply gaps in the US, with the sustainability and magnitude of COMEX trading likely to be further tested. The impact of US tariff hikes on China's demand is expected to be limited, though it may constrain China's copper cathode and copper scrap imports.With the frequent favorable policy signals, the trading and fundamental aspects are accelerating in resonance, and copper prices are expected to challenge previous highs. A comprehensive recommendation is made for the investment value of the copper sector.

Morgan Stanley believes that copper prices still have room to rise further. COMEX copper futures are trading at a 10-12% premium over the LME market. "Since tariffs have not yet been imposed, there is a strong incentive to ship copper to the US, which is also tightening supply in other global markets." "Going long on copper futures in a contango market can be challenging, as futures prices tend to 'pull back' to spot levels, but in a backwardation market, they can 'rebound,' which often drives investors into the market." "We remain optimistic about the copper market, which is our top pick among base metals. Fundamentals and price signals are positive, and as copper is drawn to the US, inventories are tightening. Tariffs may raise demand concerns in the future, but for now, the spot market remains tight."

China Fortune Futures stated: This morning, copper and aluminum were dragged down by the overnight US stock market plunge, leading to rapid intraday adjustments. However, with the recovery of the domestic stock market, macro metals copper and aluminum rebounded from lows, and the medium-term upward trend remains unchanged. In the future, attention should be paid to whether the copper concentrate TCs turning negative will trigger production cuts or maintenance at copper smelters.

Guotou Futures commented: On Tuesday, SHFE copper recovered its losses and closed at 78,000 yuan. Today, spot copper is priced at 77,660 yuan, with spot parity near delivery. Consumption has entered a relatively peak season, and the domestic social inventory inflection point has emerged. It is inclined to raise the lower support level for copper prices this week to 77,500-77,000 yuan.

Recommended reading:

» National mainstream copper inventories fell by 8,000 mt over the weekend [SMM Weekly Data]

» March copper cathode production is expected to hit a record high but may fluctuate downward afterward [SMM Analysis]

» Narrowing price difference between primary metal and scrap fails to offset weak orders; February copper cathode rod operating rate weakened MoM [SMM Analysis]

» February copper pipe & tube maintained stable operations; March may peak with high production schedules for air conditioners [SMM Analysis]

» February copper plate/sheet and strip operating rates fell short of expectations; March may still be weaker than the same period in previous years [SMM Analysis]

» Copper billet market experienced "post-Chinese New Year syndrome" in February; March may "fully recover" [SMM Analysis]

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