The expected alleviation of copper shortages outside the US is likely to exert adjustment pressure on copper prices. [Institutional Commentary]

Last week, copper prices jumped initially and then pulled back, with LME copper closing down 0.7% to $9,783/mt, while the most-traded SHFE copper contract closed at 80,420 yuan/mt. On the industry side, inventories at the three major exchanges decreased by 32,000 mt WoW, with SHFE inventories down 21,000 mt to 235,000 mt, LME inventories down 12,000 mt to 213,000 mt, and COMEX inventories up 1,000 mt to 86,000 mt. Inventories in the Shanghai Bonded Zone increased by 11,000 mt. Spot copper imports remained at a loss during the week, with limited import supply driving Yangshan copper premiums higher. In the spot market, the LME Cash/3M discount widened to $54.5/mt last week, while domestic futures first rose and then fell, with the spot-futures price spread rising. On Friday, spot prices against futures in Shanghai were at a discount of 5 yuan/mt. In the copper scrap market, the price difference between primary metal and scrap narrowed to 1,530 yuan/mt last week, reducing the substitution advantage of copper scrap. The operating rate of secondary copper rod producers continued to decline during the week. According to SMM survey data, the operating rate of refined copper rod producers fell more than expected last week, with demand marginally weakening.

On the price side, the US may impose tariffs on copper in the coming weeks. Although the uncertainty over the tariff level still poses volatility risks, the trend of global refined copper shifting to the US has halted, easing the expected shortage outside the US. Meanwhile, concerns over demand due to the potential tariffs and the US's upcoming "reciprocal tariffs" have intensified. On the raw material side, copper concentrate TCs continued to decline and have yet to bottom out. However, with increased exports of copper ore inventories from Indonesia and Panama, as well as increased smelting maintenance both domestically and overseas, TCs are expected to gradually stabilize, and trading based on raw material shortages may marginally weaken. Overall, short-term copper prices still face resistance, while attention should be paid to China's PMI data and policy expectations. This week, the most-traded SHFE copper contract is expected to trade in the range of 79,000-81,500 yuan/mt, while LME copper 3M is expected to trade in the range of $9,500-9,950/mt.