US Fed's Policy Meeting Statement Leans Neutral, Copper Prices Continue to Rise [Institutional Commentary]

The US Fed's policy meeting delivered a neutral stance, but the decision to slow the pace of balance sheet reduction slightly exceeded expectations, boosting market risk appetite. Coupled with expectations of US tariff hikes, copper prices continued to rise. Yesterday, LME copper closed up 0.96% at $9,997/mt, while the most-traded SHFE copper contract settled at 81,230 yuan/mt. On the industry side, LME inventory continued to decline yesterday by 2,525 mt to 225,175 mt, the ratio of cancelled warrants fell to 45.7%, and the Cash/3M discount narrowed to $35.7/mt. Domestically, spot premiums in the Shanghai region were lowered to 20 yuan/mt yesterday. With futures prices rising, downstream pricing interest weakened, and market transactions were poor. In Guangdong, inventory continued to decrease, suppliers stood firm on quotes, downstream procurement was moderate, and spot premiums for futures rose to 130 yuan/mt. On the import and export front, domestic spot copper import losses expanded to around 500 yuan/mt yesterday, while Yangshan copper premiums increased MoM. In the copper scrap market, the price difference between primary metal and scrap widened to 2,630 yuan/mt yesterday, enhancing the substitution advantage of copper scrap.

On the price front, uncertainty remains regarding US tariff hikes on copper products, though expectations for such hikes have strengthened, leaving copper price volatility risks in place. In the raw material market, which has been a key factor influencing recent copper price trends, copper concentrate TCs have yet to stabilize, and concerns over copper ore supply persist. However, with Freeport Indonesia regaining export permits and expectations of Panama copper ore inventory exports, TCs are expected to gradually stabilize. Additionally, the impact from maintenance at domestic smelters remains relatively small. While domestic inventory is being drawn down in the short term, its sustainability remains to be seen, and the upward momentum in copper prices may face challenges. Today's reference range for the most-traded SHFE copper contract is 80,200-81,800 yuan/mt, and for LME 3M copper, $9,900-10,100/mt.