Beijing, September 19 (Xinhua Finance): Recently, copper prices have been fluctuating upwards and setting new highs for the period. Among them, the copper price on the London Metal Exchange (LME) has reached as high as nearly 10,200 US dollars/ton, and the main contract of Shanghai copper futures has also touched a new high since the end of March this year at 81,530 RMB/ton, but then both have declined and adjusted.

Industry insiders said that the Fed's decision to cut interest rates for the first time this year at its latest rate-setting meeting was in line with market expectations, and the short-term market is in a state of positive exhaustion, with copper prices likely to remain range-bound. However, current macro and industrial factors still provide support for copper prices. In the long run, copper prices are heavily influenced by mine-end factors and still have the potential to rise, but it is necessary to pay attention to changes in supply and demand patterns and the impact of the global economic situation on copper demand.

Copper prices inside and outside the disk are on the rise and falling back

Data shows that recently, the LME copper price has broken through the psychological barrier of $10,000 per ton, reaching a intraday high of $10,192.5 per ton on September 15, setting a new high since June 2024; the main contract of Shanghai copper futures has also shown an upward trend with fluctuations, reaching a intraday high of 81,530 RMB per ton on September 16, setting a new high since the end of March this year. However, both have since experienced a decline and adjustment, as of 17:12 Beijing time on September 18, the latest prices were reported at $9,957 per ton and 79,620 RMB per ton.

Zhang Jiefu, a senior analyst at Zhengxin Futures, said that the Fed had begun to show signs of motivation to adjust its monetary policy framework, no longer treating inflation control as its main goal, and the market's expectation of a rate cut in September had significantly increased. The market believes that in the context of the US economy not yet showing a significant slowdown, resuming rate cuts will push up inflation, and this logic has stimulated the upward trend in the prices of inflation-resistant commodities such as gold, silver, and copper. However, the Fed opened the year's first rate cut at its latest interest rate meeting, in line with market expectations, and the short-term market is in a state of having exhausted its positive impact.

The impact of the Fed's rate cut on copper prices does not lie in the rate cut itself, but in the reasons for the rate cut and the subsequent path of rate cuts, said Ye Qianying, head of the financial group at Guangfa Futures Research Institute. Currently, the Fed is adopting a preventive rate-cutting strategy. After the implementation of this rate-cutting policy, it is expected that the US dollar index will gradually bottom out, and its sustained boost to copper prices in the short term is limited.

Macroeconomic sectors interweave to create a warm atmosphere

From a macro perspective, the market is more focused on whether the subsequent path of interest rate cuts by the Fed can remain stable.

“If the subsequent US inflation and employment data further strengthen the expectation of US interest rate cuts, copper prices are still likely to benefit from it. In addition, we also need to pay attention to whether the trading logic of the overseas macro market will switch,” said Ye Qianying. For copper, the most favorable macro environment combination is “the US economy shows a weak but not declining trend + the expectation of US interest rate cuts is gradually improved”. If the market trading logic switches to the direction of economic recovery, the copper price center is expected to move up further.

Zhang Weixin, a senior researcher at Zhongxin JianRMB Futures for non-ferrous metals, said the US economy, although showing signs of cooling down, still has a certain degree of resilience. The spiral cooling of the wage-inflation spiral has further consolidated the market's expectation of a Fed rate cut in the future. At the same time, the domestic market is still highly focused on the boost from short-term consumption policies and the "15th Five-Year Plan" target planning, and the overall macro atmosphere is optimistic.

"The main focus of the market before was the motivation of the Fed to cut interest rates and the test of its independence," said Zhang Jiefu. Against the backdrop of the US economy not yet showing a rapid decline, the market expected the Fed to stimulate inflation recovery through a series of interest rate cuts, and the rising inflation expectations further drove the copper price higher.

From an industrial perspective, Zhang Jiefu said that on the supply side, the profit situation of copper smelting enterprises is still under great pressure. Copper mine production is maintained at a low growth rate, but the capacity of the smelting side continues to expand, which causes more profits to flow to the copper mine exploration and mining industry.

On the supply and demand side, Zhang Weixin said that at the beginning of September, market demand had not yet fully recovered, and copper prices continued to strengthen. Downstream enterprises still focused on digesting the previous finished goods inventory, but the spot supply was obviously tight. On the raw material side, all mining operations at the Grasberg underground mine in Indonesia were suspended due to safety accidents. On the smelting side, from September to the middle of October, the domestic market entered a period of intensive maintenance, and the overall supply and demand structure of the copper market showed a tight balance with a bias towards supply and moderate demand.

Remains with upward potential in the long term

In the short term, Zhang Weixin said that the positive effects of the Fed's rate cuts have been fully priced in the market, and after the "boots" of policy are on the ground, market funds are at risk of peaking and falling, and the market trading logic has shifted to predicting the future path of the Fed's rate cuts.

Looking at the rest of this year, Zhang Jiefu believes that copper prices will continue to fluctuate within a range. In the short term, the focus should be on the changes in the US economic cycle after the US Fed cuts interest rates, and the fundamentals should pay attention to the process of trade rebalancing in the copper market, especially whether the record-high inventory in the US copper market will once again flow to the international market.

Ye Qianning also believes that copper prices can at least maintain a volatile trend without a clear expectation of an economic recession in the United States. To start a new upsurge, two conditions need to be met: a stable path of interest rate cuts by the Federal Reserve and a strong and realistic phase of demand in the copper market. Currently, the market expects the path of interest rate cuts to remain relatively stable, but the downstream demand performance in the domestic copper market is relatively weak. The focus should be on the changes in inventory during the peak season and the dynamic adjustment of the Federal Reserve's path of interest rate cuts.

In the long run, Zhang Jiefu believes that copper prices are significantly affected by mine-end factors, the price中枢 is on the rise, and the profit distribution of the industrial chain enterprises is more inclined to the upstream link, and the performance of the mineral resources-rich equity assets may continue to be better than the commodity price.

Zhang Weixun also believes that copper prices still have the potential to rise in the long term. From the perspective of the Kondratiev cycle, the current valuation space for copper prices is at the end of the fifth long wave depression and the initial stage of the transition to the long wave upswing. If the fifth technological leap can bring economic recovery signals, mass production or equipment renewal demand will form a larger gap in the supply and demand relationship of copper. From the perspective of the elasticity of resource supply, the future Increment of global copper mine is still limited. However, if the Panama copper mine resumes production at the end of this year or next year, the shortage of copper supply and demand in the short term is likely to be reversed into surplus. From the impact of the global economic situation on demand potential, on the overseas side, US President Trump's "big and beautiful" bill, which attempts to stimulate the economy through consumption and tax cuts, can bring a boost to the US economy in the short term. However, the increasing fiscal deficit will push up interest rates, thereby bringing inflationary risks and potentially having a negative feedback effect on the US economy in the long term. On the domestic side, the economy and policy have strong resilience, and the economic recovery momentum is worth looking forward to under the impetus of the "15th Five-Year Plan".

As an integrated internet platform providing benchmark prices; On September 24th, the benchmark price of copper by SunSirs was 80,018.33 RMB per ton, an increase of 0.78% compared with the beginning of this month (79,401.67 RMB per ton).

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