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 a ceasefire extension 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 Strait of Hormuz transit had not been fully eliminated, and geopolitical uncertainties persisted. Overall, the macro theme this week remained expectations of warming US-Iran peace talks and a weaker US dollar being bullish for copper prices, but geopolitical fluctuations kept copper prices hovering at highs.
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 beginning to reduce usage or even facing production reduction risks, as ore supply 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, current fundamentals still pointed to deepening ore supply tightness. Although longer-term supply expectations saw marginal improvement, this offered limited relief to the tight near-term 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. Fundamentals side, ore supply tightness and rising costs are expected to continue supporting the price floor, and copper prices are likely to continue fluctuating 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. Spot cargo side, as absolute prices rise, downstream willingness to chase highs may be suppressed. The pace of inventory drawdown 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 discount of 80 yuan/mt.
![Geopolitical Risk Uncertainty Persisted, the Most-Traded BC Copper Contract Stabilized [SMM BC Copper Commentary]](https://imgqn.smm.cn/usercenter/FERSF20251217171712.jpg)
