Auto Tariffs Hit, Copper Prices Adjust at High Levels [Institutional Commentary]

On Wednesday, the most-traded SHFE copper 2505 contract continued to rise, while LME copper pulled back at the key level overnight. The COMEX copper premium expanded to above $1,500. The domestic near-month April-May price spread turned to parity. The spot copper market was inactive on Wednesday, as downstream buyers were cautious about the rapid rise in copper prices and mainly adopted a wait-and-see approach. Spot prices fell to a discount of 20 yuan/mt. Yesterday, LME inventory dropped to 217,000 mt.

On the macro front, the US President announced a tariff of up to 25% on all cars and specific parts not manufactured in the US, which will gradually increase from the base rate of 2.5%. He stated that the auto tariffs are permanent measures with no room for negotiation or exemption. The news weighed on market sentiment, and the US dollar rebounded, putting pressure on metals. The Canadian Prime Minister said that the US tariffs are a direct attack on Canadian workers and seriously violate the rules of the USMCA. He will speak with the US President as soon as possible. The President of the St. Louis Fed warned that the impact of tariffs on US inflation may not be short-lived, and the US Fed may need to maintain higher interest rates for a longer period. Trade barriers will have a more lasting second-round effect on the underlying inflation of importing countries.

On the industry front, according to foreign media reports, Glencore suspended copper shipments from its Altonorte smelter in Chile due to issues with the smelting furnace. In 2024, Altonorte's refined copper production reached 349,000 mt.

The US auto tariffs have been implemented with no room for negotiation or exemption. US Fed officials stated that trade barriers will have a more lasting second-round effect on the underlying inflation of importing countries. The US dollar rebounded, causing US copper to jump initially and then pull back. On the fundamentals side, tightening mine supply provides strong cost support, and domestic destocking has begun. Technically, LME copper faces resistance at the key level. It is expected that copper prices will enter a high-level consolidation in the short term, with the risk of a rapid pullback from high levels in the medium term. (Source: Jinyuan Futures)