Copper Prices Surpass the 80,000 Mark: Macro Factors Intertwined, Weak Supply and Demand Fundamentals—How Will the Copper Market Perform? [SMM Commentary]

Mar 14, 2025 19:16

Source:SMM

[SMM Commentary: Copper Prices Break Through the 80,000 Yuan Mark Amid Mixed Macro Signals and Weak Supply and Demand Fundamentals—How Will the Copper Market Perform?] Amid rising concerns over a US economic recession and the impact of US tariffs clouding the global demand outlook, the US dollar index continued its weakness. Coupled with US non-farm payrolls growth falling short of expectations and February CPI inflation in the US coming in below expectations across the board, market expectations for a US Fed interest rate cut have increased. LME and SHFE copper prices initially declined but later rebounded this week. Market expectations for domestic policy support to continue boosting demand, combined with ongoing destocking of domestic copper inventories, have supported copper prices. As of 16:53 on March 14, LME copper rose 0.58% to $9,840/mt, with its weekly performance extending the previous week's gains, up 2.36% so far. SHFE copper increased 1.03% to 80,500 yuan/mt, marking its second consecutive weekly gain with a rise of 2.29% this week.

SMM March 14 News:

Amid rising concerns over a US economic recession and the global demand outlook clouded by US tariff disruptions, the US dollar index remained weak. Coupled with lower-than-expected US non-farm payrolls and February CPI inflation figures, market expectations for a Fed interest rate cut increased. LME and SHFE copper prices initially declined but rebounded this week. Market expectations for domestic policy support to boost demand, combined with continued destocking of domestic copper inventories, supported copper prices. As of 16:53 on March 14, LME copper rose 0.58% to $9,840/mt, with a weekly gain of 2.36%, continuing the previous week's uptrend. SHFE copper rose 1.03% to 80,500 yuan/mt, with a weekly increase of 2.29%, marking two consecutive weeks of gains.

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Fundamentals

Spot Copper Concentrate TC Prices Declined Slightly This Week, Market Expectations for Unscheduled Smelter Maintenance Strengthened

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Spot copper concentrate TC prices edged lower this week. On March 14, the SMM Imported Copper Concentrate Index (weekly) stood at -$15.92/mt, down $0.09/mt from the previous week's -$15.83/mt. The pricing coefficient for 20% grade domestic ore was 93%-95%. This week, there were few spot transactions between mines/traders and smelters, while transactions between mines and traders were notably active. Market expectations for unscheduled smelter maintenance strengthened. According to SMM, the Indonesian government has lifted the export ban on Freeport copper concentrates, and export permits have been approved, though not yet signed. Some copper concentrate inventories are reportedly awaiting shipment. If subsequent shipments proceed smoothly, this could alleviate tightness in the spot copper concentrate market to some extent and stabilize spot TC prices.》Click for Details

Domestic Copper Inventories Declined for Two Consecutive Weeks, LME Copper Inventories Showed Significant Destocking This Week

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Domestic Inventory: As of Thursday, March 13, copper inventories in major regions across China tracked by SMM fell by 4,500 mt from Monday to 355,500 mt, down 12,500 mt from the previous Thursday, marking two consecutive weeks of weekly destocking. Current levels are 20,600 mt lower than the annual peak and 33,600 mt lower YoY. Specifically, Shanghai inventories increased slightly by 500 mt from Monday to 235,400 mt, while Jiangsu inventories rose by 1,200 mt to 59,000 mt, mainly due to weaker downstream consumption amid higher copper prices, though limited arrivals of imported copper capped the increase. Guangdong inventories fell by 600 mt to 53,600 mt, as arrivals were scarce (due to smelter exports, increased direct shipments from smelters, and reduced shipments from other provinces to Guangdong), while consumption remained moderate.》Click for Details

Overseas Inventory: Both LME and COMEX copper inventories showed destocking this week. LME copper inventories stood at 233,750 mt on March 14, down 23,575 mt from 257,325 mt on March 7. COMEX copper inventories were 92,797 short tons on March 13, up slightly by 339 short tons from 92,458 short tons on March 6.

Refined Copper Rod Operating Rates Rose WoW This Week, Inventory Pressure May Emerge Next Week

Refined Copper Rod: The weekly operating rate of major domestic refined copper rod enterprises (March 7-13) increased WoW. On March 11, copper prices hit a short-term low, leading to a notable increase in downstream orders for copper rods on that day. However, on a weekly average basis, new orders remained limited, constrained by the subsequent rise in copper prices. The single-day increase in orders did not significantly drive destocking, as downstream pick-ups were mainly for previously priced low-cost orders, and end-use consumption showed no significant recovery. Currently, only South China is performing well in consumption, driven by orders in new energy and home appliances. In terms of inventory, with rising premiums, raw material inventories at refined copper rod enterprises continued to decline this week.》Click for Details

Outlook

Macro: Domestic: The People's Bank of China (PBOC) stated during an expanded meeting that it will choose the timing for RRR cuts and interest rate cuts based on domestic and international economic and financial conditions and financial market operations. It will comprehensively use various monetary policy tools, such as open market operations, to maintain ample liquidity, ensuring that the growth of social financing scale and money supply aligns with economic growth and price level targets. Key data to watch next week include the March LPR quotation, MLF operation scale, China's February industrial output growth rate for above-scale enterprises, the NBS monthly report on housing sales prices in 70 large and medium-sized cities, and press conferences by the State Council Information Office on economic performance and consumption promotion.

Overseas: Focus on the resolution of the US government shutdown crisis. The US Fed will hold a monetary policy meeting next week, with the market currently expecting the Fed to keep the target overnight rate unchanged at 4.25%-4.50%. Although Fed Chairman Jerome Powell stated at a University of Chicago Booth School of Business event that the Trump administration's policies have increased economic uncertainty, the US economy remains in good shape. The Fed is not in a hurry to cut rates and can wait for the impact of Trump's policies to become clearer. However, the balance between US "stagflation" pressures and US Treasury dynamics continues to sway market sentiment, with the US dollar index expected to have further downside room. Additionally, watch for the Bank of England's rate decision, the Bank of Japan's rate decision, and the press conference by BOJ Governor Kazuo Ueda.

Fundamentals: Looking ahead, with the export window open, future imports are expected to remain limited, while exports may increase, leading to tight supply next week. On the demand side, as copper prices continue to rise, some downstream orders have already started to decline, and consumption is expected to weaken next week. SMM anticipates a weak supply-demand dynamic next week, with weekly inventories continuing to decline, though at a slower pace than the previous week.

In Summary: Macro: Focus on next week's LPR and MLF updates and whether the State Council Information Office's press conference on consumption promotion will bring more positive news to boost copper demand. Uncertainty surrounding US tariff policies has heightened concerns about global trade conflicts and economic slowdown. The new US president has indicated downward pressure on the economy, while the US Treasury Secretary has stated that current government spending is unsustainable, strengthening market expectations for a weaker US dollar. Fundamentals side, domestic copper concentrate port inventories continue to decline, high copper prices are suppressing downstream demand, and the open export window is expected to lead to slight destocking of copper inventories. With weak supply and demand, fundamental support for the copper market is weakening. SMM expects copper prices to hover at highs amid a mix of domestic macro optimism, US stagflation concerns, and a weak US dollar. Attention should also be paid to developments in the DRC and their potential impact on copper prices.

Institutional Views:

Guotai Junan Futures: SHFE copper's most-traded contract surged to 80,500 yuan/mt on Friday, with spot copper at 79,925 yuan/mt. Shanghai copper premiums were 20 yuan/mt, Guangdong premiums were 70 yuan/mt, and South China consumption was stronger. The price difference between primary metal and scrap widened to 2,330 yuan/mt. After breaking 80,000 yuan, technical space opened up to 81,000-81,500 yuan. The market is also watching the impact of the DRC situation on local copper product transportation.

China Fortune Futures: Tensions in the DRC have halted production at related tin mines, causing a sharp rise in tin prices. Notably, the DRC also hosts large copper mines, such as Zijin Mining's Kamoa Copper Mine, which completed its Phase III project six months ahead of schedule. Once fully operational, it will increase mined copper output to over 600,000 mt, making it Africa's largest and the world's third-largest copper mine. In the short term, focus on developments in the DRC. Meanwhile, the negative copper concentrate TC has raised concerns about future smelter production cuts. Macro factors, such as domestic policy support and a weaker US dollar, have also contributed to recent copper price strength, with sustained capital inflows.

Maike Futures: Macro factors are slightly bearish, but the US copper tariff hike remains the dominant market narrative. Increased supply disruptions are also fueling speculation, keeping copper prices strong. Short-term sharp gains are suppressing demand, but the low SHFE/LME price ratio limits downside potential. Technically, 78,000 yuan/mt is a strong support level, with significant open interest added this week, indicating strong upward momentum in the short term. Maintain a buy-on-dip strategy, with next week's main trading range expected to be 81,000-79,000 yuan/mt.

Citi: Copper prices are expected to rise to $10,000/mt in March, driven by temporarily stronger US copper import demand and broader constraints on concentrate and scrap copper supply.

CITIC Securities: Expectations for higher US copper import tariffs have been escalating, pushing COMEX copper prices and the COMEX-LME price spread to new highs. Strengthened tariff expectations may exacerbate short-term supply gaps in the US, with sustained and significant COMEX trading activity likely. The impact of US tariffs on China's demand is expected to be limited but may restrict China's imports of copper cathode and scrap copper. Combined with frequent domestic policy support, trading and fundamentals are accelerating in resonance, and copper prices are likely to challenge previous highs. Comprehensive investment in the copper sector is recommended.

Copper Prices Surpass the 80,000 Mark: Macro Factors Intertwined, Weak Supply and Demand Fundamentals—How Will the Copper Market Perform? [SMM Commentary]

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