The US dollar index declined, while copper prices continued to show strength. [Institutional Commentary]

Published: Mar 26, 2025 08:55

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The US dollar index declined. Reports indicated that Glencore's copper smelter Altonorte in Chile suspended production due to furnace issues (operating capacity of approximately 300,000 mt). Copper prices continued their strong performance, with LME copper closing up 1.61% at $10,094/mt yesterday, while the most-traded SHFE copper contract closed at 82,780 yuan/mt. On the industrial front, LME inventory decreased by 1,825 mt to 219,950 mt yesterday, with the ratio of cancelled warrants dropping to 49.1%, and the Cash/3M discount at $39.6/mt. Domestically, spot discounts in the Shanghai region were at 15 yuan/mt against futures yesterday, with the spot-futures price spread narrowing, leading to increased procurement by some downstream players, though overall performance remained moderate. Inventory in the Guangdong region increased slightly, with spot premiums against futures flat at 190 yuan/mt, as downstream players made limited restocking, and trading activity was weak. On the import-export front, domestic spot copper imports incurred a loss of around 650 yuan/mt yesterday, while Yangshan copper premiums remained flat MoM. In the copper scrap market, the price difference between primary metal and scrap stood at 2,330 yuan/mt yesterday, with the substitution advantage of copper scrap remaining relatively unchanged.

Price-wise, market expectations for a US tariff hike remain strong, with the price spread between US copper and LME copper maintaining a high level. As the extent of the tariff hike remains uncertain, risks of copper price volatility persist. Meanwhile, copper concentrate TCs continue to decline, with no signs of stabilization yet. However, as exports of copper ore inventories from Indonesia and Panama increase and smelting maintenance rises both domestically and internationally, TCs are expected to gradually stabilize, potentially weakening transactions based on raw material shortages. Overall, copper prices still have room to rise further, but as prices climb, caution is warranted against negative feedback from consumption and the risk of bullish factors being realized after the US tariff hike takes effect. Today’s reference range for the most-traded SHFE copper contract is 81,800-83,500 yuan/mt, while the reference range for LME copper 3M is $9,950-10,200/mt.

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