"Equivalent Tariffs" Unexpectedly Depress Copper Prices, Can the Continuous Decline in Inventory Bring a Turnaround to the Copper Market? [SMM Commentary]

SMM April 3 News: On April 2, Trump announced "reciprocal tariffs," which exceeded market expectations, sparking concerns about the risk of "stagflation" in the US economy and escalating global trade conflicts. This has cast a shadow over the demand prospects for non-ferrous metals such as copper. On April 3, copper futures on the three major exchanges all declined. As of 15:08 on April 3, LME copper fell 2.25% to $9,502.5/mt, with a weekly decline of 2.98% so far. SHFE copper dropped 1.28% to 78,860 yuan/mt, with a weekly decline of 2.27%. As of 15:37 on April 3, COMEX copper fell 3.17% to $4.8805/lb, with a weekly decline of 4.86% so far. Click to view SMM futures data dashboard. Fundamentals: The decline in copper prices has boosted market trading sentiment, but market transactions have not seen a significant increase. Click to view SMM spot copper prices. Click to order and view SMM historical spot price trends. Spot prices: On April 3, the average spot price of SMM #1 copper cathode was 79,150 yuan/mt, down 905 yuan/mt from the previous trading day, a decline of 1.13%. SMM #1 copper cathode saw more declines than gains this week. Market transactions: In the Shanghai spot market, intraday spot activity increased compared to the previous day, but overall trading volume decreased. Downstream buyers were active in pricing below 79,050 yuan/mt, but bearish sentiment rose, leading to a decline in intraday purchases compared to the previous day. With copper prices falling this week, downstream buyers' willingness to pick up goods increased, driven by Qingming Festival stockpiling. In the South China spot market, Guangdong inventories fell for two consecutive days, mainly due to a significant reduction in arrivals. Despite the decline in both inventories and copper prices, downstream companies showed little willingness to restock ahead of the Qingming holiday. Most companies will take one day off, with some taking two days, and spot transaction prices remained flat compared to the previous day. In the North China market, downstream purchasing sentiment improved, and market activity increased. However, due to previous inventory accumulation, stockpiling demand did not see a significant increase. Domestic copper inventories have seen weekly destocking for five consecutive weeks. Click to view SMM metal industry chain database. Domestic copper inventories: As of Thursday, April 3, SMM mainstream regional copper inventories in China fell by 23,600 mt from Monday to 313,600 mt, down 20,900 mt from the previous Thursday, marking the fifth consecutive week of destocking. Inventories have now fallen by 63,400 mt from the year's high and are 74,400 mt lower YoY. Outlook: Macro front: Domestically, attention should be paid to Qingming consumption data and the upcoming release of China's CPI and PPI data. Market expectations for domestic macro positives have risen, and follow-up favorable policies are worth watching. Internationally, following Trump's announcement of reciprocal tariffs, US short-term interest rate futures briefly rose. Futures pricing reflects a nearly 50% probability of the US Fed cutting rates four times this year, up from the earlier expectation of three cuts. The market will focus on tonight's US non-farm payrolls and unemployment data. If the job market weakens more than expected, expectations for Fed rate cuts may rise. Both the US economic recession and rate cut expectations will weigh on the US dollar. Next week, attention will also be on US CPI data to gauge the Fed's rate path. The market will also monitor the implementation of US reciprocal tariffs and their potential to repeatedly disrupt copper demand. Additionally, caution is warranted regarding the impact of the Section 232 investigation results on copper prices. Fundamentals: Affected by smelter maintenance, domestic copper supply will decrease, and imported copper arrivals will not increase. Total supply is expected to decline next week compared to this week. On the consumption side, as copper prices have fallen to previous lows, downstream restocking enthusiasm will rise. Therefore, SMM believes that next week will see reduced supply and increased demand, with weekly inventories expected to continue to decline. In summary, with Trump's announcement of "reciprocal tariffs," multiple countries and regions have stated they will retaliate, and the global economic growth outlook is expected to continue to weigh on copper prices. Market expectations for domestic macro positives have risen, and if there are unexpected favorable policies, they may boost copper prices. Fundamentally, domestic copper inventories are expected to continue destocking, which may provide support for domestic copper prices, as reflected in the weaker decline in SHFE copper prices this week compared to LME and COMEX copper prices. This week (as of April 3), the SMM Imported Copper Concentrate Index (weekly) has fallen to -$26.40/mt, and the expected tight supply of copper concentrates may provide support on the supply side. Currently, macro headwinds are present, and while fundamentals provide support, concerns about suppressed future copper demand may keep copper prices fluctuating downward. Institutional views: Jinyuan Futures' copper report noted that although the global baseline rate of US reciprocal tariffs is low, the specific tariffs imposed on some countries exceeded market expectations. Trading partners announced immediate countermeasures, officially kicking off global trade friction. Market risk appetite has significantly declined, and copper, as a barometer of the global economy, is inevitably under pressure. Fundamentally, First Quantum has withdrawn its international arbitration over the Panama copper mine, China's refined copper production rebounded MoM in March, and domestic destocking has slowed. Copper prices are expected to remain weak in the short term. Guoxin Futures' report stated that on April 2, the White House announced that President Trump declared a national emergency. The statement said Trump will impose a 10% "baseline tariff" on all countries, effective at 00:01 Eastern Time on April 5. Additionally, Trump will impose higher "reciprocal tariffs" on countries with the largest trade deficits with the US, effective at 00:01 Eastern Time on April 9. All other countries will continue to adhere to the original 10% baseline tariff. The statement noted that some goods will be exempt from "reciprocal tariffs," including gold bars, copper, pharmaceuticals, semiconductors, and wood products. As the price spread between overseas and domestic copper narrows, arbitrage opportunities will gradually diminish. Specific tariff policies on copper have not yet been finalized, and uncertainty will continue to amplify copper price volatility. Market trading may gradually focus on the potential inventory pressure on LME copper and the negative feedback on demand from tariff implementation. SHFE copper is expected to fluctuate at high levels, with continued attention to the implementation of US tariff policies and risk control. Everbright Futures noted that in terms of inventories, LME copper increased by 1,400 mt to 211,875 mt; COMEX copper rose by 3,343.01 mt to 91,816.2 mt; SHFE copper warrants fell by 5,624 mt to 130,379 mt; BC copper warrants increased by 1,499 mt to 16,516 mt. The continuous increase in COMEX copper inventories may indicate that previous arbitrage positions are gradually being delivered. Domestic copper downstream faces restocking, and with the inverted price spread between domestic and overseas markets, the actual momentum for active shorting is insufficient. The US reciprocal tariffs do not currently apply to copper, but uncertainty remains. However, the previously excessive price spread between US and LME copper needs some correction, creating arbitrage opportunities. In terms of absolute prices, attention should be paid to whether short-term bearish factors have been fully priced in and whether copper will resume a slow upward trend. Citi expects copper prices to fall to around $8,500/mt by Q3 2025. Recommended reading: Copper prices decline, downstream demand improves, North China market activity rises [SMM North China Copper Cathode Spot Weekly Review]. Weekly mainstream regional copper inventories in China fell by 23,600 mt [SMM Weekly Data]. CSPT did not set a Q2 copper concentrate spot purchase guidance price, Grasberg copper mine gradually flows into the Chinese market [SMM Copper Concentrate Spot Weekly Review]. SMM weekly new data interpretation—copper enamelled wire operating rate and orders [SMM Analysis]. For more updates on the copper industry chain, you are welcome to attend the CCIE 2025 SMM (20th) Copper Conference and Copper Industry Expo, hosted by SMM, to be held in Nanchang, Jiangxi from April 22-25, 2025. Over 3,000 industry elites, representatives from upstream and downstream copper industry enterprises, government officials, industry associations, third-party equipment, logistics and warehousing, and academic experts will gather. The conference covers the entire industry chain, including mining, smelting, copper processing, trade, recycling, and end-use applications. At the conference, over 100 exhibitors will showcase the latest copper processing and smelting equipment, high-quality raw material suppliers, and new-type copper-based materials, highlighting the innovation and vitality of the copper industry. The event features a rich program: the main forum focuses on global copper market trends, raw material supply, policy impacts, and market direction. Sub-forums delve into industry hotspots in electrical power transmission and distribution, secondary copper, copper-based new materials, hardware and plumbing, and energy storage. The conference also includes a two-day field trip to 12 representative copper industry enterprises with a cumulative capacity of 1 million mt, sharing cutting-edge technologies and valuable experiences to promote industry chain upgrading and high-quality development. CCIE 2025 SMM (20th) Copper Conference and Copper Industry Expo helps you grasp industry trends, expand your network, and explore business opportunities! SMM cordially invites you to join us in Nanchang, Jiangxi from April 22-25, 2025, to gather in the new era of copper and jointly plan for new development!