SMM: With the easing of Sino-US tariffs and the support of fundamental factors, copper and aluminum prices are expected to fluctuate upward [SMM Cable Conference]

On May 22, at the 2025 SMM (3rd) Wire and Cable Industry Development Conference & Wire and Cable Industry Exhibition - Main Forum, which was hosted by SMM Information & Technology Co., Ltd. (SMM), co-organized by Luoyang Sanwu Cable Group Co., Ltd., and specially supported by Jiangsu Cable Association, Henan Electrician Association, Zhejiang Cable Association, Hunan Cable Association, Guangdong Cable Association, Shanghai Cable Association, Shenzhen Robot Special Cable Association, Guizhou Cable Association, and Hubei Cable Association, as well as strongly supported by Anhui Xinhai High Conductivity New Materials Co., Ltd., Minfeng Cable Group Co., Ltd., Soochow Futures Co., Ltd., Zhejiang Dongyi Holding Group Co., Ltd., and Jiangsu Zhongli Group Corporation, Ltd., Ye Jianhua, the General Manager of SMM's Industry Research Department, analyzed the copper and aluminum markets amidst the volatile macroeconomic environment.

Macro - Volatile and Unpredictable

In mid-May, the unexpected conclusion of the China-US trade agreement eased global economic tensions.

►SMM Analysis

On May 12, substantive progress was made in the China-US economic and trade talks in Geneva, and a joint statement was issued. The content of the trade agreement exceeded market expectations, alleviating the previous market tensions. In addition, the ongoing negotiations between the US and countries such as India and Japan have shown a mild momentum, which is conducive to the global economic recovery and has boosted copper prices.

The manufacturing PMI of major global economies remained below 50. Affected by geopolitical conflicts and US tariff policies, the copper/gold ratio declined, indicating strong market risk aversion sentiment.

He analyzed the trends of the manufacturing PMI of major global economies, the US CPI, the copper/gold ratio, LME copper prices, and the US dollar index.

The "Stagflation" and "Recession" in the US Economy Disturb Global Asset Prices

He discussed the yields of US long-term and short-term government bonds, the University of Michigan Consumer Sentiment Index, the University of Michigan Consumer Current Conditions Index, the University of Michigan Consumer Expectations Index, as well as the US: Markit Manufacturing PMI (Final), and the US: Markit Services PMI: Business Activity (Final).

Major European economic indicators began to show signs of recovery, and large-scale infrastructure investment funds were established to boost the economy.

The domestic consumer market needs further stimulation, while the export market will face greater challenges, with local government bond issuance accelerating.

He elaborated from the perspectives of China's export situation, consumer confidence, the sustained growth of household savings, the monthly total issuance of local government bonds, the continued increase in inventory area in the real estate industry, and the negative growth in construction area and completion area.

Copper and Aluminum Supply

The increase in global major copper mine output primarily comes from expansion projects.

It elaborates on the expected increase in global major copper mine new expansions & newly commissioned projects from 2020-2023.

The rapid global expansion of copper smelter capacity makes it difficult to alleviate the tight raw material situation.

Domestically, the growth rate of refining capacity is expected to remain higher than that of smelting capacity in the future, theoretically creating a gap that would need to be filled by copper anodes and copper scrap.

Overseas, although anode copper capacity is expected to expand, it is fundamentally a transfer of copper concentrate raw materials. Due to the shortage of copper concentrate raw materials, it will be difficult to achieve the target of increasing smelting capacity, which may lead to a decline in global smelting production and a widening of the actual gap with refining capacity.

The intensified shortage of copper concentrates exacerbates the deterioration of the supply-demand structure in the short term, making it difficult to reverse.

Under the tight supply of copper concentrates, processing fees continue to decline, and smelter losses expand.

It analyzes content such as the SMM imported copper concentrate TC index, regional sulphuric acid prices, estimated consumable copper concentrate quantities for Chinese copper smelters, and the SAVANT global copper dispersion index.

In late April, the LC price spread widened again, and some imported B/Ls were re-exported to the US.

In late April, the LC price spread widened again, with the US continuing to attract supply. The supply gap in Chile and logistical issues in the DRC will continue to push up China's spot premiums. Yangshan copper premiums have fully surpassed $100/mt. The continuous improvement of the domestic import window has led to a large number of cancellations of LME Asia warrants, supporting the LME backwardation structure.

The expected tightening of supply is being realized, and the risk of copper futures squeezes is expanding.

Entering May 2025, global visible inventory has further declined, and the number of available days for global copper cathode has continued to decrease. Domestic social inventory has even fallen to the 100,000 mt threshold. The backwardation structure of SHFE copper and LME copper has further widened, with strong borrowing demand in the market. Under the risk of squeezes, there is a risk of a phased increase in copper prices on both the domestic and international markets.

The easing of cost pressures on the aluminum cost side has weakened the bullish impact on aluminum prices.

According to SMM data, the average tax-inclusive full cost of China's aluminum industry in April 2025 was 16,386 yuan/mt, down 3.7% MoM and 0.9% YoY, mainly due to the significant pullback in alumina prices during the period.

►SMM Analysis

Entering May 2025, the monthly average price of alumina continues to decline; auxiliary material costs are falling; and power costs remain stable. Overall, the cost of aluminum is expected to show a downward trend.

In summary, SMM expects that the average tax-inclusive full cost of China's aluminum industry in May 2025 will be around 16,000-16,400 yuan/mt.

Production: In May, domestic capacity replacement projects achieved output, and the proportion of liquid aluminum dropped back slightly.

According to SMM statistics, domestic aluminum production in April 2025 (30 days) increased by 2.6% YoY and decreased by 2.9% MoM. The proportion of liquid aluminum in domestic aluminum smelters fluctuated slightly in April, with the industry's proportion of liquid aluminum sliding by 0.52 percentage points MoM to 74.0%. Based on SMM's data on the proportion of liquid aluminum, it is estimated that domestic aluminum casting ingot production in April decreased by 0.9% YoY to approximately 944,400 mt.

►SMM Analysis

Entering May 2025, the operating capacity of domestic aluminum smelters remained at highs. The second batch of capacity replacement projects from Shandong to Yunnan by a certain aluminum smelter are expected to commence in Q3, with the first batch of projects expected to achieve output in May. In addition, some enterprises have recently undergone capacity maintenance. SMM has learned that many have adopted a method of small-batch, rotational maintenance, causing relatively small disruptions to the supply side.

Going forward, it is still necessary to monitor changes in downstream operating rates and the proportion of liquid aluminum in domestic aluminum smelters amid weakening demand.

Inventory: Post-Qingming Festival, low prices stimulated consumption, and social inventory destocking provided support for aluminum prices.

According to SMM statistics, domestic aluminum social inventory was 601,000 mt on May 12, destocking by 19,000 mt from the previous Thursday. Domestic aluminum billet social inventory was 152,700 mt, destocking by 4,800 mt from the previous Thursday.

►SMM Analysis

During the Labour Day holiday, the performance of domestic aluminum ingot inventory was slightly better than expected, with overall controllable inventory buildup, which did not cause significant pressure on aluminum prices in the short term after the holiday. However, market attention is focused on post-holiday consumption and warehouse outflow performance. Currently, low prices are stimulating downstream purchasing sentiment, and demand resilience remains. Coupled with the rush to meet deadlines during the US-China tariff window period to stimulate consumption, it is expected that domestic aluminum ingot inventory will continue to exhibit a trend of steady and slight declines in the first half of May, operating within the range of 550,000-630,000 mt, providing good support for aluminum prices.

Demand: The structure of end-use demand has differentiated somewhat.

Although the degree of trade dependence on the US is declining, the US remains China's largest single trading partner.

In 2024, total export trade with the US accounted for 14.7% of China's total exports. It also introduced the export situation of major products such as auto parts, home appliances, mobile phones, and lithium batteries to the US in 2024.

Asia is China's main export market for copper semis, which is vulnerable to US coercion. Copper scrap imports from the US will decline significantly in 2025.

In 2024, copper semis exports to the North American market were 60,000 mt, accounting for 7.4% of total exports. In 2024, nearly 20% of China's copper scrap imports came from the US.

Aluminum Semis Exports: A temporary surge in exports may occur due to the easing of US-China tariffs.

In April 2025, China's exports of unwrought aluminum and aluminum semis reached 518,000 mt, increasing by 2.4% MoM and decreasing by 0.4% YoY. From January to April 2025, cumulative exports reached 1.883 million mt, a cumulative decrease of 5.7% YoY.

►SMM Analysis

According to the SMM survey, as export enterprises in Shandong and South China completed a new round of order signing in April, they are focusing on expanding into emerging markets with significant potential for building material demand, such as South America, Africa, Russia, and Serbia, providing effective support for exports in the month. Regarding wheel hubs, the SMM survey found that the proportion of direct aluminum wheel hub exports to the US is limited, and the current order system remains relatively stable. Exports of plate/sheet, strip, and foil have shown a mild rebound. Some enterprises reported that customers have advanced procurement needs during the traditional off-season from June to August. Meanwhile, the depreciation of the US dollar in April, coupled with the pullback in LME aluminum prices, created a window of temporary export price advantages. This, combined with intensified domestic market competition, has compelled enterprises to increase their efforts in overseas market development.

In addition, the easing of Sino-US tariffs with a 90-day window period may stimulate domestic export enterprises to rush to meet deadlines, with short-term aluminum semis exports expected to continue growing.

In 2025, the State Grid Corporation of China plans to invest over 650 billion yuan, representing a YoY increase of over 7% compared to the actual investment in 2024.

It analyzed indicators such as investment in power grid infrastructure, investment in power supply infrastructure, aluminum delivery volumes, and copper delivery volumes.

The construction industry is still in negative growth and has not yet formed positive feedback for copper and aluminum consumption.

Based on data from recent years, including commercial housing sales, sources of real estate development funding, performance of construction and completion areas in real estate, and changes in retail sales of building and decoration materials, it indicates that the negative growth in construction and real estate-related data has narrowed.

The impact of tariffs on the home appliance industry is gradually becoming apparent.

Uncertain tariffs have not significantly affected orders already confirmed in April. However, during the traditional peak season, there have been instances of extended delivery dates. In April, the operating rate of copper pipe & tube production decreased by 1.51 percentage points MoM and 2.81 percentage points YoY.

In May 2025, the production schedule for household air conditioners increased by 15.4% compared to the actual domestic sales performance in the same period last year, while the export schedule decreased by 1.6% compared to the actual export performance in the same period last year.

Demand: NEVs remain the main driver of aluminum consumption growth, but the growth rate is slowing down.

In the end-use consumption of aluminum, the construction, transportation, and power electronics industries account for nearly 70% of the total. In recent years, with the decline in the real estate sector and the rapid development of the new energy industry, the proportion of aluminum consumption in the new energy sector has continued to increase, providing a new consumption engine for domestic aluminum consumption.

►SMM Analysis

2024 was a year when domestic aluminum consumption continued to shift towards the new energy industry. The expected growth in global PV installations and the increasing penetration rate of NEVs have driven the growth in aluminum consumption in the power and transportation sectors, offsetting the decline in aluminum consumption in other traditional industries such as construction. In 2024, the total aluminum consumption in the domestic power electronics and transportation sectors increased by 7.5% YoY, accounting for 46.3% of the total domestic aluminum consumption. In 2025, the total aluminum consumption in these two sectors is expected to continue growing by 4%, providing a new consumption engine for domestic aluminum consumption.

Combining estimates of aluminum consumption in other sectors, SMM forecasts that domestic primary aluminum consumption in 2025 is expected to increase by 1.5% YoY, with the power electronics and transportation sectors leading in growth.

In the medium and long-term, the new energy sector remains one of the primary drivers of global copper consumption growth.

Combining data such as changes in global NEV production from 2022-2030E, an analysis was conducted on the development trend of global new energy copper consumption.

Global Copper Cathode Balance and Price Forecast

•In Q1 2025, market risk sentiment rose before Trump's tariffs were implemented, with tariff expectations specifically targeting copper once driving up COMEX copper prices, leading to a significant widening of the LME-CME price spread, which persisted at a high level, with the US absorbing a large amount of copper. Additionally, since December, favorable US economic data and rising inflation expectations have generally stabilized and boosted commodity prices. Domestically, favorable policies were introduced at the beginning of the year, fostering positive macro sentiment and supporting copper prices. On the fundamental side, the expected expansion of the ore supply deficit and contraction of copper cathode supply in 2025 also contributed to the rise in copper prices.

•In Q2 2025, with the implementation of US reciprocal tariffs and intensified Chinese countermeasures, a tariff storm hit, coupled with weakening US economic data. The market traded on expectations of economic damage from tariffs, causing copper prices, a barometer of the global economy, to plummet. Subsequently, China may introduce various favorable policies to boost domestic demand. As the US-China trade war began with significant moves, copper prices may gradually recover, supported by fundamental factors (accelerated destocking of copper outside the US, low inventory levels, and expectations of squeezing positions under a strong backwardation structure) and domestic favorable policies.

•In Q3 and Q4 2025, as the negative sentiment from the trade war dissipates, copper prices may catch a breath. However, under the pressure of an economic recession brought about by high tariffs, the surplus of refined copper may widen (previously expected to be 80,000 mt surplus domestically). Q3 may see a tug-of-war between weak supply and demand due to expectations of production cuts at smelters and consumption damage, placing certain pressure on copper prices. In Q4, the consumption damage from the trade war weakens, and expectations of global economic recovery gradually strengthen. The effects of earlier relatively loose fiscal policies in China and the US become apparent, while fundamental factors such as expected shortages of ore and refined copper are high, and the center of copper prices is expected to rise again.

Supply-Demand Balance Table: Global supply and demand transition to a small surplus in 2025, with demand entering a period of steady growth.

►SMM Analysis

•Throughout 2025, the domestic supply side is gradually approaching its ceiling, with production growth narrowing to around 2.1%. Meanwhile, the development of new energy and other sectors in China will continue to drive primary aluminum consumption, and the easing of US-China tariffs will stimulate overseas export order demand. However, there is still an expectation of a decline in aluminum consumption in the traditional domestic construction sector. SMM forecasts that aluminum consumption growth in 2025 will narrow to around 2.0%. In addition, despite the trend of overseas market outperforming domestic market in aluminum prices, net imports this year have increased more than expected. The supply side is loose, and the surplus in domestic supply and demand has widened throughout the year.

•Outside of India, the growth rate of consumption in other overseas regions is not optimistic. However, with the commissioning of new projects in Southeast Asia, the overseas supply and demand situation has shifted towards inventory buildup.

Key points of aluminum in this report

►SMM Analysis

On the macro side, the easing of Sino-US tariffs and the existence of a 90-day window period have had a significant positive impact, which may drive up overall aluminum prices in the subsequent period. On the fundamental side, the high operating rates of aluminum smelters and the supplement of imported supplies have maintained stable domestic supply. The recent retreat in aluminum prices has stimulated downstream purchasing sentiment, and inventory drawdowns have provided support for aluminum prices. Coupled with the impact of increased demand for end-use products due to rush exports during the subsequent Sino-US tariff window period, aluminum prices may fluctuate upward. Continuous attention should be paid to the impact of tariff events on consumption promotion and changes in domestic demand in the future.

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