Industry news: Increasing of copper price recently
After a short period of repair in mid-late February, since March, "Dr. Copper" rally restarted, COMEX copper shock climbed back to 4.8 cents/pound above, the London Metal Exchange's three-month copper is also approaching the 10,000 US dollars per ton mark, and Shanghai copper also stood on the 80,000 yuan per ton mark. That's a more than eight-month high.
The high premium driven by tariffs exacerbates the supply imbalance in the global copper market
Since January this year, under the influence of the Trump administration's tariff policy, the copper premium in the New York and London markets has soared, which has a clear impact on copper supply in different regions and has pushed copper prices up strongly in January, the traditional off-season in the Northern hemisphere.
Due to the dual impact of the US government's tariff policy and the low level of US copper inventories, since January this year, the price of COMEX copper compared with three-month London copper has risen rapidly from less than $100 per ton in December last year, and broke through the $1,000 per ton mark in mid-February. By mid-March, COMEX-LME premiums remained at historic highs of $800 to $1,000 a tonne.
High premiums have driven an aggressive cross-market carry trade: warehouse receipts from London copper stocks that can be delivered on the COMEX market for registered brands have been written off and transferred to the US market; Some of the copper supplies from Africa and South America that should have been destined for London warehouses were shipped to North America.
Since the current round of high premium is behind the uncertainty of the US tariff policy, before the tariff is clear, the institution has a strong expectation that the high premium will continue and lead to the tight supply of copper in the United States and even globally.
Citi analysts said in a report last week that copper prices will break the $10,000 / ton mark in the next three months, and the global copper market will remain tense until the United States import tariff policy is clear. Physical copper markets outside the United States, in particular, are likely to remain tight into May or June and could temporarily offset "price headwinds from the broader U.S. tariff announcement."
China's peak demand season kicks off the depletion of global copper inventories
At the same time that supply is constrained, with the opening of the traditional demand season in China, the world's largest copper consumption market demand has begun to pick up significantly. The direct manifestation is the opening of copper inventory in the Chinese market.
Data from the Shanghai Futures Exchange show that copper inventories in registered warehouses fell by nearly 12,000 tonnes in the week to March 14 from the previous month, about 10,000 tonnes more than the previous week. On the spot market, SMM data show that as of the week of March 13, the domestic mainstream regional electrolytic copper inventory was 355,500 tons, and the weekly inventory was 12,500 tons, and fell 0.45 million tons from Monday, for the second consecutive week to the inventory.
Reflected in the rising discount, according to SMM data, the current domestic spot copper discount has risen from the discount of more than 100 yuan/ton in mid-February to the premium of about 20 yuan/ton, reflecting the improvement of the supply and demand relationship in the spot market.
In the global market, the short-term reduction of copper inventories is also universal. In the London market, the removal of copper inventories has also accelerated in the past two weeks: as of March 14, London copper inventories have fallen to 234,000 tons, compared with 257,300 tons and 262,100 tons in the same period of the previous two weeks. In the COMEX market, although affected by the high premium, the COMEX copper reported inventory has been rapidly repaired from the level of less than 10,000 tons in June last year to more than 90,000 tons, but compared with the level of more than 100,000 tons in February this year, the current reported inventory level of only 93,000 tons has also declined significantly.
The elimination of explicit inventories has strengthened the bullish support for copper prices due to copper supply constraints.
Copper prices still face potential volatility risks
It should be noted that although supply constraints are positive for copper prices, potential changes in fundamentals will also have an impact on market expectations, thereby increasing the risk of copper price volatility.
In the near term, in addition to the uncertainty of the US tariff policy, the supply and demand changes in the copper industry chain may also bring disturbance to market expectations.
From the perspective of the domestic market, SMM's survey shows that the latest week of domestic copper rod enterprises and copper cable enterprises operating rates are lower than expected, reflecting the high copper prices on downstream demand suppression.
In the international market, on the one hand, the recent sharp decline in the US stock market has raised concerns about the US economy falling into recession under the influence of tariff policies, which has also affected the long-term demand for industrial metals such as copper. On the other hand, there were reports that Panama authorized the export of copper concentrate stockheld in Panama by First Quantum Minerals, reviewed the shuttered Cobre Panama copper mine and restarted a power plant needed to operate the mine. The move sparked speculation that Panama was interested in restarting the mine.
To sum up, although the copper market is expected to maintain a strong trend under the constraints of short-term supply and demand mismatch, it is still the consensus of the market, but the volatility risk of copper prices hovering near historical highs is also worthy of vigilance.
