SMM: As the negative impact of tariffs gradually weakens, medium and long-term fundamentals may drive copper prices to decline first and then rise [[SMM Copper Conference]]

Published: Apr 28, 2025 17:43

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[SMM Commentary: Copper Prices on the LME and SHFE Climb to New Highs in the First Week After the Holiday. Can China's Favorable Macro Conditions Continue to Drive Copper Prices Higher?] Ye Jianhua, Director of SMM Big Data, shared insights on the theme of "Copper: Micro-Driven and Macro-Volatile." The shortage of copper concentrates has intensified, and the deterioration of the supply-demand structure in the short term is difficult to reverse. In the medium and long term, the new energy sector remains one of the primary drivers of global copper consumption growth. In Q3 and Q4 of 2025, as the negative sentiment from the trade war dissipates, copper prices will get a reprieve. However, under the pressure of economic recession brought about by high tariffs, the surplus of copper cathode may increase. Q3 may see a tug-of-war between expectations for production cuts at smelters and weakened consumption, placing certain pressure on copper prices. In Q4, the impact of the trade war on consumption will diminish, and expectations for global economic recovery will gradually strengthen. The effects of the relatively loose fiscal policies in China and the US earlier will become apparent. With high expectations for shortages of ore and copper cathode in the fundamental market, the center of copper prices is expected to rise again.

**English Translation:**

On April 23, at the **CCIE-2025 SMM (20th) Copper Industry Conference & Copper Industry Expo – Main Forum**, jointly hosted by **SMM Information & Technology Co., Ltd. (SMM)**, **SMM Metal Trading Center**, and **Shandong Aisi Information Technology Co., Ltd.**, with **Jiangxi Copper Corporation** and **Yingtan Land Port Holdings Co., Ltd.** as co-sponsors, **Shandong Humon Smelting Co., Ltd.** as a special co-organizer, and **Xinhuang Group** and **Zhongtiaoshan Nonferrous Metals Group Co., Ltd.** as co-organizers, **Ye Jianhua, Big Data Director of SMM**, shared insights on the theme "Copper: Micro-Driven Forces and Macro Volatility."

**Macro: Turbulent and Unpredictable**
- Global manufacturing PMIs of major economies mostly remained below 50. Geopolitical conflicts and US tariff policies drove down the copper/gold ratio, reflecting strong market risk aversion.
- The US economy faced "stagflation" and "recession" fears, disrupting global asset prices. Analyses incorporated US long- and short-term Treasury yields, non-farm payroll changes, University of Michigan consumer sentiment/status/expectations indices, and Markit manufacturing/services PMIs.
- Key European economic indicators began improving, with large-scale infrastructure investment funds launched to boost the economy. Topics covered included gradual eurozone interest rate cuts and slowing declines in construction/retail confidence.
- Domestic consumer markets require further stimulation, while export markets face greater challenges despite rapid local government bond issuance. Discussions referenced rising real estate inventory, negative growth in construction/completion areas, export data, and monthly local bond issuance.
- US reciprocal tariffs, targeting "trade deficits" and aimed at addressing its $36 trillion+ debt, introduced significant market volatility.

**US Reciprocal Tariff Details:**
- At 4:00 AM Beijing time on April 3, a 10% baseline tariff was imposed on ~60 countries with major US trade imbalances, effective 00:01 AM Eastern Time on April 5. Equalization tariffs followed on April 9.
- Canada and Mexico were exempted, with previous delayed tariffs to take effect soon. USMCA-compliant goods retain exemptions.
- Items already subject to Section 232 tariffs (25% on steel/aluminum, autos/parts, copper, pharmaceuticals, semiconductors, timber, energy) remain unaffected.

**Supply: Global Copper Supply Tightening**
- Copper concentrate shortages worsen; short-term supply-demand imbalances persist. Analyses included 2021-2030 global copper concentrate supply-demand balances (with disruption rates), annual long-term contract TC benchmarks, and smelter feedstock competitiveness.
- In 2024, US secondary copper raw material exports exceeded 900,000 mt of physical tons (~700,000 mt metal content).
- Domestic scrap copper supply increasingly relies on self-produced growth, with smelter-bound flows rising.
- COMEX prices surged under tariff expectations, with the US absorbing global copper cathode. Key indicators: LME-COMEX price spreads, LME registered/cancelled warrant ratios, global exchange copper inventories, and total COMEX copper stocks.
- China's copper cathode imports from Chile/Peru declined sharply, with African imports expanding.
- Falling imported copper supplies accelerated domestic cathode inventory drawdowns. Data sources: SMM China cathode production, spot import profit/loss & Yangshan premiums, cathode imports, and social inventories.

**Demand: Diverging End-Use Structures**
- While US trade dependence declines, it remains China's largest single trading partner (14.7% of total exports in 2024).
- Asia dominates China's copper semis exports, vulnerable to US coercion. US scrap copper imports to China will drop significantly in 2025.
- Copper semis exports to North America reached 60,000 mt (7.4% of total) in 2024; ~20% of China's scrap imports originated from the US.
- State Grid Corporation of China plans 650+ billion yuan investments in 2025 (+7% YoY vs. 2024 actuals).
- Construction/real estate sectors remain in contraction, failing to support copper consumption. SMM forecasts a 2% YoY decline in construction copper use in 2025.
- "Export rush" demand persists; traditional peak-season domestic growth keeps copper pipe operating rates high, though export concerns mount.
- April copper pipe operating rate forecast: 85.81% (+0.58pp MoM, -0.72pp YoY). Pre-tariff export rushes and strong March copper pipe/air-conditioner exports drive activity. Domestic sales will strengthen during peak season, but tariff impacts may slow export growth, with rates stabilizing at highs.

**Medium-Long Term: New Energy Remains a Key Growth Driver**
**Global Copper Balance & Price Outlook**
- **2025Q1**: Pre-Trump tariff risk sentiment elevated copper prices. COMEX rallied on tariff fears, widening LME-CME spreads. Robust US data and inflation expectations supported commodities. Domestic stimulus policies and expected mine deficits/production cuts boosted prices.
- **2025Q2**: Tariff implementation and Chinese retaliation triggered a copper price crash amid economic damage fears. Domestic stimulus may counterbalance, with prices recovering on US destocking, low inventories, and backwardation-driven squeeze risks, though retesting 80,000 yuan/mt is unlikely.
- **2025Q3-Q4**: Trade war sentiment fades, but high tariffs risk recession and surplus refined copper. Q3 faces smelter cuts and weak demand; Q4 may see price rebounds from fiscal policies, mine/refined shortages, and improving global sentiment.

*Click to view CCIE-2025 SMM (20th) Copper Industry Conference & Expo Special Report*

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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