Copper Price Rally Resonates with On-Demand Pricing [Institutional Commentary]

Market Sentiment: Copper prices continued to surge, led by US copper, with the COMEX copper weighted index hitting a record high last week. The market's focus on the US-LME price spread shifted to far-month contracts, and the main contract on the US market has not yet broken last year's high. On tariffs, the market is turning its attention to news about reciprocal tariffs from the newly appointed US president at the beginning of next month. In terms of indicators, the University of Michigan consumer confidence index and retail sales in the US remained weak, but housing starts and industrial production showed moderate performance. The US Fed, as expected, kept interest rates unchanged, raised inflation expectations, lowered economic growth forecasts, and predicted two interest rate cuts this year. The Fed has revised down the US economic growth forecast for this year from 2.1% to 1.7%. Meanwhile, the OECD has also revised down global GDP growth, with a significant downward revision for Canada. In terms of macro and funding sentiment, the current stage is more prone to trading the "inflation" side, with significant attention on the momentum of gold prices reaching new highs and whether silver prices will catch up. This week, the focus is on the preliminary March manufacturing PMI, durable goods orders, and February PCE data from major economies. Domestic Supply and Demand: Upstream, the TC for imported copper concentrates continued to decline, with Mysteel's sampled TC dropping to -20.28 $/dmt. The market is paying attention to the entry of copper concentrates from Indonesia and Panama. In terms of scale, both regions imported over 650,000 mt of refined copper into China in 2023, accounting for approximately 2.5% of total domestic concentrate imports. The proportion of Indonesian concentrates flowing into China is low, with some also going to Japan and South Korea, but a large proportion of Panamanian copper concentrates once flowed into China. In April, leading smelting capacities are undergoing maintenance, which may lead to observable changes in TC. On the consumption side, high copper prices have suppressed the operating rates of copper-related products, but the current period is in the seasonal peak season. Buying interest in the Pearl River Delta region is stronger, with Guangdong copper premiums reaching 190 yuan/mt, while Shanghai turned to parity. SMM social inventory recently decreased by 12,800 mt to 333,600 mt, 53,670 mt lower than the same period last year. Guided by the price spread, refined copper exports in January-February were 49,400 mt, while cumulative imports during the same period were 533,700 mt, a YoY decrease of 12.66%. Currently, the domestic supply and demand situation supports copper prices to continue fluctuating at high levels and testing higher. Overseas News: Peru's copper production in January increased by 7% to 216,600 mt, with output from MMG's Las Bambas mine increasing. Zambia's copper production in 2024 is expected to increase by 12% to 820,000 mt, up from 732,000 mt in 2023. Kazakhstan's refined copper production in the first two months remained stable, growing by 1%. Outlook: SHFE copper's adjustment period was short, and the correction range is likely to be limited due to buying demand during the peak season. On Monday, the SHFE copper weighted index saw an increase in positions and another rise, with technical space opening up to 82,500. The copper market is still in a "buff-stacking" upward trend, with no signs of a shift from "inflation" to "stagnation" yet.