In March 2025, SHFE copper and LME copper broke through the 80,000 yuan/mt and $10,000/mt thresholds respectively, with market enthusiasm comparable to the same period in 2024. However, the driving logic behind these two surges was fundamentally different: the former was driven by inflated expectations, while the latter was driven by a deep adjustment in the supply and demand structure.
The unilateral rise in copper prices in 2024 was a typical case of overstretched expectations. The market pushed up prices based on three strong expectations: first, the expectation of tight ore supply due to weather disruptions in Chile and the shutdown of the Panama copper mine; second, the over-optimism about new energy demand driven by the doubling of PV installations and the high growth of new energy vehicle consumption data; and third, the expectation of US dollar depreciation amid expectations for US Fed interest rate cuts.
In reality, the release of new capacity in countries such as the DRC and Indonesia led to a slight YoY increase in global copper mine production, while the phase-out of PV policies slowed consumption growth, and the US dollar index fluctuated within a limited range. Ultimately, ICSG data showed a global copper surplus of 301,000 mt in 2024. The divergence between expectations and reality caused copper prices to pull back significantly in H2 2024.
In contrast, the rise in copper prices in 2025 exhibited more complex structural characteristics.
Supply side, the persistent inversion of TCs (long-term contracts fell to $20-30/mt) combined with production cuts by companies such as Tongling Nonferrous Metals intensified market expectations of smelting capacity contraction. Although copper cathode production still hit a record high in January-February, the slowdown in copper ore import growth and overseas disputes increased supply risks, tilting bargaining power toward mines.
Demand side, copper rod and copper pipe & tube production rebounded to historical highs in Q1, and this year's power grid investment is expected to exceed 700 billion yuan, with new energy and AI computing power demand providing long-term growth. Meanwhile, expectations of the US government imposing copper tariffs triggered cross-market arbitrage, with the price spread between COMEX copper and LME copper exceeding $1,300/mt, driving copper resources to the US and boosting short-term demand.
In addition, wire and cable factories locked in costs through buy hedging, while social inventory and exchange warrants peaked and pulled back, shifting the market structure from Contango to Backwardation, strengthening price support.
Before May, expectations of supply contraction, the peak demand season effect, and the logic of tariff arbitrage will continue to dominate the market, and copper prices may remain strong. However, caution is needed as the traditional consumption off-season may curb price gains. If US inflation rebounds and the room for interest rate cuts narrows, concerns about a US economic recession may arise. If the Panama copper mine resumes production and conflicts in the DRC ease, ore-side pressure may be alleviated.
In the long term, the imbalance between insufficient global copper mine capital expenditure, declining grades, and growing new energy demand will support the upward shift in the copper price center. If supply contraction in H2 2025 falls short of expectations, copper prices may face the risk of premium retracement.
We believe that the rise in copper prices in 2024 was an "ivory tower" of overstretched expectations, while 2025 is a real game of supply and demand restructuring. The current market is in a period of intertwined supply contraction and demand growth, and key variables around May will determine the height and sustainability of this round of market trends. Investors need to closely monitor policy developments, ore-side disruptions, and inventory changes, seeking a balance between optimistic expectations and potential risks.
(Source: Futures Daily)
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