Tariff uncertainties persist, copper prices fluctuate [Institutional Commentary]

China's Caixin Manufacturing PMI rebounded, while the US "reciprocal tariffs" remain uncertain. Overnight, US stocks dipped and then recovered, with copper prices fluctuating. Yesterday, LME copper edged up 0.03% to $9,692/mt, and the most-traded SHFE copper contract closed at 79,820 yuan/mt. On the industry front, LME inventory increased by 1,900 mt to 213,275 mt, as the rise in European inventory offset the decline in Asian inventory. The ratio of cancelled warrants dropped to 47.6%, with the Cash/3M spread at a discount of $51.4/mt. Domestically, spot premiums in Shanghai were lowered to 10 yuan/mt, with market activity improving at the beginning of the month and downstream pickup volume showing MoM improvement. Inventory in Guangdong continued to rise, with spot premiums flat at 10 yuan/mt, as downstream restocking increased and trading warmed up. On the import and export front, domestic spot copper imports incurred a loss of around 500 yuan/mt, while Yangshan copper premiums remained flat MoM. In the scrap copper sector, the price difference between primary metal and scrap widened to 1,450 yuan/mt, slightly enhancing the substitution advantage of scrap copper. On the news front, indigenous communities in Peru's Cusco region blocked access to Glencore's Antapaccay copper mine to protest its expansion plan. In 2024, the Antapaccay mine produced 146,000 mt of copper.

On the price front, the US may impose tariffs on copper in the coming weeks. Although the uncertainty over the tariff magnitude continues to pose volatility risks, the halt in the global refined copper shift to the US has eased expectations of a copper shortage. However, 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 have yet to bottom out, and supply disruptions in the mining sector have prolonged the tightness in copper ore supply. Attention is focused on changes in TCs and their impact on market sentiment. Overall, the improvement in domestic demand following the pullback in copper prices is evident, and coupled with supply-side disruptions, price support has strengthened. However, demand concerns stemming from US tariff policies will limit the rebound potential of prices. Today, the most-traded SHFE copper contract is expected to trade within the range of 79,200-80,500 yuan/mt, while LME copper 3M is projected to move between $9,600-9,800/mt.