Concerns Over Economic Slowdown Intensify, Copper Prices Fall Back from Highs [Institutional Commentary]

On Thursday, the most-traded SHFE copper 2505 contract fell back from highs, while LME copper pulled back to the 9,850 level under pressure at the key resistance level, and COMEX copper adjusted to around 510¢/lb. The domestic 4-5 price spread narrowed, and the spot copper market saw sluggish trading on Thursday. Copper prices fluctuated at highs, with downstream restocking delayed, and spot prices dropped to a discount of 30 yuan/mt. Yesterday, LME inventory decreased to 215,000 mt.

On the macro front: The EU indicated it might retaliate against the US in trade by restricting the intellectual property of large US tech companies, targeting sectors such as aircraft, chemicals, and pharmaceuticals. The IMF (International Monetary Fund) expects the US economy to slow down compared to 2024 during the period when the US president implements focused policies, but a recession is unlikely in the foreseeable future. Richmond Fed President Barkin believes the current US economy faces unpredictable risks, and trade policies will exert pressure on price increases. Under the current policy environment, businesses and consumers lack confidence, making decision-making difficult. The St. Louis Fed President stated that if tariffs trigger uncontrolled inflation expectations, the US Fed is more likely to prioritize price stability over balancing the job market. We believe that under the backdrop of successive tariffs by the US presidential administration, the US faces stagflation risks, and economic growth in other countries will encounter severe challenges, with copper, as an economic barometer, inevitably under pressure.

On the industry front: According to data from the National Bureau of Statistics (NBS), from January to February this year, China's non-ferrous metal smelting and rolling processing industry achieved operating revenue of 1.28551 trillion yuan, up 21.3% YoY, with a total profit of 36.63 billion yuan, up 20.5% YoY.

With the implementation of auto tariffs and the approaching expectation of reciprocal tariffs, US Fed officials are concerned that trade policies will trigger uncontrolled inflation expectations. The EU and other partner countries plan to implement rule-of-law measures, posing severe challenges to global economic fundamentals. On the consumption side, US tariffs on copper imports may be implemented in the short term, suppressing the arbitrage space for US-LME deliveries. On the fundamentals side, tightening mine supply provides mid-term cost support. Technically, LME copper failed to effectively hold above the key resistance level, and copper prices are expected to shift into a high-level pullback in the short term.