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| Copper |
Tight Supply and China Demand Drive Copper Gains Despite Trade Uncertainty
Copper prices are showing signs of strength, lifted by easing trade tensions between the U.S. and China, but uncertainty continues to cloud the outlook. After a turbulent first quarter marked by tariff risks and economic volatility, copper is now up around 9% year-to-date.
The recent agreement between Washington and Beijing to temporarily reduce tariffs has bolstered sentiment. The U.S. cut duties on Chinese goods to 30% from 145% for 90 days, while China lowered its tariffs to 10%. While this marked a de-escalation, the truce is temporary and the path forward remains unclear.
Market Signals: Tight Supply, Rising Demand
Supply constraints are tightening the copper market globally. SHFE and LME inventories have fallen sharply, and both exchanges moved into backwardation in late April, a sign of near-term supply stress. Chinese buyers rushed to ship copper to the U.S. before any new tariffs were implemented, driving Comex copper stocks to their highest since 2018.
In China, copper demand has remained resilient despite a sluggish property sector. Key sectors like electric vehicles, machinery, and the State Grid have seen rising consumption. State Grid spending rose 25% year-on-year in Q1, reinforcing China's position as the world’s top copper buyer.
Premiums and Imports Reflect Strong Demand
The Yangshan premium—a benchmark for copper import demand in China—has soared to over $100/tonne, its highest since late 2023. At the same time, copper concentrate imports into China hit a record high last month, nearly 3 million tonnes, up 24% from April 2024. This has pushed treatment charges to record lows amid expanding Chinese smelting capacity.
China’s refined copper output also reached new highs, up 9% year-on-year in April to 1.25 million tonnes. While the government has imposed stricter rules on building new smelters, these policies may ultimately constrain output, supporting prices if tightness persists.
Revised Forecasts and Risk Factors
We now forecast copper to average $9,300/tonne in Q2 and $9,277/tonne for 2025, revising upward from earlier estimates. However, risks remain. Prolonged U.S.-China trade negotiations and reduced Chinese stimulus could weigh on prices. On the upside, policy-driven cuts to smelter output and continued supply tightness may support a further rally.
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