Copper Prices Consolidate at High Levels [Institutional Commentary]

【Investment Logic】① Macro: The US core PCE price index rose 2.8% YoY in February, compared to the expected 2.7%. The higher-than-expected US core PCE in February dampened the prospects of an interest rate cut by the US Fed. The final reading of the University of Michigan Consumer Sentiment Index for March was 57, compared to the expected 57.9 and the final reading of 64.7 in February. ② Supply and Demand: According to ICSG, the global refined copper market experienced a supply deficit of 19,000 mt in January 2025, compared to a deficit of 22,000 mt in December 2024. In January 2025, global refined copper production was 2.38 million mt, while consumption was 2.4 million mt. Last week, the operating rate of SMM copper wire and cable enterprises was 72.86%, down 1.67 percentage points MoM, down 0.22 percentage points YoY, and 3.99 percentage points lower than the expected operating rate. High copper prices have suppressed the purchasing sentiment of end-users. ③ Profit: The weekly TC was -$24.14/mt (down $1.26/mt MoM). In February, the smelting loss for long-term copper contracts was 678 yuan/mt, while the spot smelting loss was 2,093 yuan/mt. Continuous smelting losses have strengthened expectations for production cuts. ④ Inventory: As of Thursday, March 27, SMM's copper inventories in mainstream regions across the country increased slightly by 900 mt from Monday to 334,500 mt, down 11,900 mt WoW, marking the fourth consecutive week of destocking, and were 56,400 mt lower YoY.

【Investment Strategy】The continuous weakening of copper mine TC and the siphoning effect of US copper premiums have accelerated global destocking. Concerns over the US economic outlook and the expectation of early tariff implementation have triggered a pullback in copper prices from highs. Copper concentrate inventories at Chinese ports have started to rebound, and short-term copper prices are expected to consolidate at high levels.