Early this week, the market continued to trade around expectations of US-Iran peace talks and fluctuations in the Middle East situation. The US and Iran maintained contact, with expectations of an extended ceasefire and subsequent talks driving a recovery in risk appetite. The pullback in the US dollar provided support for copper prices. Meanwhile, the US March PPI came in below expectations, temporarily easing inflation concerns and supporting copper prices to rise. However, as the US continued to expand its shipping blockade against Iran, disruptions to passage through the Strait of Hormuz had not been fully eliminated, and geopolitical uncertainties persisted. Overall, the macro theme this week remained warming expectations of US-Iran peace talks and a weaker US dollar being bullish for copper prices, but geopolitical fluctuations kept copper prices hovering at highs.
On the fundamentals side, the ore supply tightness narrative continued to ferment. Amid Middle East disruptions, some sulphuric acid supplies to the DRC were obstructed, with some enterprises already cutting usage or even facing production reduction risks, as ore-side disruptions further transmitted to the production stage. Meanwhile, although Panama's Cobre Panama was authorized to process and export stockpiled materials, this did not signify a formal restart of the mine, and actual short-term incremental supply remained relatively limited. Overall, the current fundamentals still pointed to deepening ore supply tightness. Although longer-term supply expectations saw marginal improvement, this offered limited relief to the near-term tight landscape.
Looking ahead to next week, the macro narrative is expected to remain largely unchanged. If US-Iran negotiations continue to advance, a weaker US dollar is expected to continue supporting copper prices; however, given the potential for renewed Middle East tensions, upside for copper prices is expected to remain constrained. On the fundamentals side, ore supply tightness and rising costs continue to provide support below prices, and copper prices are expected to most likely continue to fluctuate at highs in the near term. LME copper is expected to fluctuate between $13,000-13,500/mt, and SHFE copper between 100,500-103,500 yuan/mt. On the spot side, as absolute prices rise, downstream willingness to chase higher prices may be suppressed. Inventory destocking is expected to slow down, but spot cargo is still expected to find support due to tight spot circulation. Spot prices against the SHFE copper front-month contract are expected to range from a discount of 30 yuan/mt to a premium of 80 yuan/mt.
