Tariffs Spark Demand Concerns, Copper Prices Adjust [Institutional Commentary]

Concerns over demand and expectations of supply-side impacts caused by US tariffs eased, leading to an adjustment in copper prices. Yesterday, LME copper closed down 0.61% at $9,846/mt, while the most-traded SHFE copper contract closed at 80,810 yuan/mt. On the industrial front, LME inventory decreased by 1,475 to 215,275 mt yesterday, with the ratio of cancelled warrants dropping to 48.1%, and the Cash/3M discount at $46.3/mt. Domestically, spot discounts to futures in Shanghai were at 30 yuan/mt yesterday, with sluggish market activity and weak buying interest. Inventory in Guangdong continued to increase, and downstream restocking demand was low at the end of the quarter, with spot premiums to futures adjusted down to 90 yuan/mt. On the import and export front, domestic spot copper imports incurred a loss of over 700 yuan/mt yesterday, and Yangshan copper premiums declined. In the scrap copper market, the price difference between primary metal and scrap widened to 2,440 yuan/mt yesterday, enhancing the substitution advantage of scrap copper.

Price-wise, as the US copper tariff implementation approaches, tight supply outside the US has eased. However, due to the uncertainty surrounding the tariff rates, volatility risks in copper prices remain. Meanwhile, copper concentrate TCs have yet to bottom out, but with increased exports of copper ore inventories from Indonesia and Panama, as well as rising smelting maintenance both domestically and internationally, TCs are expected to gradually stabilize, potentially weakening transactions based on raw material shortages. Overall, the positive effects of US tariffs have been partially realized, and the slowdown in domestic inventory destocking may continue to exert downward pressure on copper prices. Today, the most-traded SHFE copper contract is expected to trade within the range of 80,000-81,500 yuan/mt, while LME copper 3M is expected to trade within $9,700-9,950/mt.

(Source: Minmetals Futures)