COMEX Copper Premium Soars as LME Copper Surpasses 10,000 US Dollar Mark Downstream Buying Interest Cools [SMM Express]

SMM March 20 Update:

Concerns over the US imposing additional tariffs on copper resurfaced, causing a significant rise in COMEX copper prices on March 19. The price spread between COMEX and LME copper has surged to over $1,300, creating an arbitrage incentive for traders and producers to continue shipping copper to the US before the tariffs are implemented. The increase in COMEX copper also pushed LME copper above the $10,000/mt mark during trading on March 20. As of 1:09 PM on March 20, LME copper was up 0.15%, at $10,002.5/mt, with a year-to-date gain of 14.05%. As of 1:11 PM on March 20, COMEX copper was up 0.65%, at $5.133/lb, with a year-to-date gain of 27.48%; SHFE copper was up 1.15%, at 81,580 yuan/mt, with a year-to-date gain of 10.54%.

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After frequent increases in spot refined copper prices, downstream buyers have become cautious and are holding back from purchases due to high prices.

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In the spot market: On March 20, the average price of SMM #1 copper cathode was 81,440 yuan/mt, up 865 yuan/mt from the previous trading day, a 1.07% increase. In terms of market transactions: Guangdong inventories have declined for 13 consecutive days, dropping by 32,500 mt from the highest level this year. This has encouraged suppliers to stand firm on quotes, leading to a substantial rise in premiums. However, the excessive premium increase, coupled with the sharp rise in copper prices, has made downstream buyers reluctant to accept high premiums, resulting in poor overall trading in the South China market. Downstream buyers, wary of high prices, have almost lost interest in buying, with very few inquiries, and only sporadic transactions in the North China market.

Outlook:

According to Section 232 of the US Trade Expansion Act of 1962, the US Department of Commerce must complete its investigation within 270 days, with a deadline of November 22, 2025. Ultimately, the department will submit a report with recommendations to the White House, and Trump will determine the conclusions and take action within three months of receiving the report, i.e., by March 30, 2026, at the latest. Before the US authorities complete their investigation and provide recommendations, there remains uncertainty regarding future US tariffs on copper, which may repeatedly disrupt copper prices.

Several investment banks expect the US to impose tariffs on copper by the end of the year, and many copper traders anticipate that the price spread between COMEX and LME copper could continue to widen, attracting bullish funds to push up COMEX copper prices, and potentially driving up copper prices in both the SHFE and LME markets. Additionally, global copper may flow to the US due to arbitrage activities and stocking demand from US companies, leading to supply tightness in other regions and further pushing up copper prices. For the future trend of copper prices, attention should be paid to changes in the price spread between the NYMEX and LME. If the spread continues to widen, it may further drive up copper prices; if it narrows, the impact of the arbitrage space on copper prices will weaken. It is also necessary to monitor changes in fundamentals. Currently, concerns about tight copper ore supply have not been alleviated. Future attention should be given to whether the easing of export policies for copper concentrates in Indonesia and Panama can alleviate market concerns about supply tightness. After sustained increases in copper prices, "fear of high prices" has suppressed resilient downstream consumption, and in a situation of weak supply and demand, attention should be paid to whether increased exports and reduced imports can continue to reduce domestic copper inventories. If destocking continues, it may provide support for copper prices. Furthermore, for the future direction of copper prices, one must be vigilant about the impact of repeated geopolitical conflicts on market risk appetite, as well as the potential for renewed concerns about a "stagflation" in the US economy following the implementation of US tariff policies, which could suppress copper prices if "Trump recession trades" gain momentum.

Institutional Views:

Goldman Sachs and Citigroup both expect the US to impose a 25% import tariff on copper by the end of the year. JPMorgan expects the US to impose at least a 10% tariff on refined copper and copper products by the end of Q3 2025, with a significant risk of the tariff being raised to 25%.

Minmetals Futures noted: At the price level, there is still uncertainty regarding the US imposing additional tariffs on copper, and the expectation of such tariffs has strengthened, posing risks to copper price volatility. The raw material market is also a key variable affecting recent copper price movements. Although TCs for copper concentrates have not yet stabilized, and concerns about copper ore supply persist, Freeport Indonesia's renewed export license and expectations of copper inventory exports from Panama suggest that TCs may gradually stabilize. Additionally, the impact of maintenance at domestic smelters is relatively small, and short-term domestic inventory reduction is expected, though its sustainability remains to be observed, making it difficult for copper prices to rise smoothly.

Jinyuan Futures stated: The US Fed did not raise rates in March and did not overly worry about inflation caused by tariffs. The dot plot indicates two rate cuts by the Fed this year. The market is actively trading the premium expectations for US copper tariffs, and some Chinese copper smelters have implemented production cut plans, boosting bullish sentiment. Fundamentally, the growth rate of mine supply continues to decline, with TCs turning negative. Domestic social inventories are declining, and LME copper is approaching the $10,000/mt mark. Copper prices are expected to remain strong in the short term, but caution is needed against the risk of a price correction due to expectations of a mild US economic recession.

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