Price trends

Data monitored by SunSirs shows that copper prices fluctuated widely last week; as of September 4, the price stood at 110,031.67 RMB/ton, up 0.56% from the beginning of the week and up 37.23% year-on-year.

According to the weekly price trend chart from SunSirs, over the past three months, copper prices fell for three weeks and rose for nine weeks, with a slight increase recorded last week.

LME copper inventories

Data released by the London Metal Exchange (LME) shows a slight increase in LME copper inventories; as of the end of last week, stocks stood at 234,175 tonnes, down 0.04% from the beginning of the week.

On the macro front, sentiment was generally bearish last week. Federal Reserve Governor Warsh delivered hawkish remarks at the Jackson Hole Economic Symposium, reaffirming a steadfast commitment to the 2% inflation target; consequently, the probability of a September rate hike rose from under 40% to approximately 60%, while the likelihood of a December hike climbed to 90%. The US Dollar Index rose 0.85% to 99.68, exerting downward pressure on US dollar-denominated copper prices. Geopolitically, although tensions between the US and Iran have eased, the Strait of Hormuz remains closed, though market reaction to this has become muted. Domestically, the manufacturing PMI for August rose by 0.6% month-on-month to 49.8%; while business activity improved, it remained below the 50-point threshold separating expansion from contraction. Overall, the combination of rate hike expectations and a strong US dollar continues to weigh on copper prices, though this is partially offset by expectations of a domestic peak season and policy-driven support.

On the supply side, the deepening supply crunch serves as the core support for the current copper price rally. Copper concentrate treatment charges (TCs) have plummeted to a historic low of -$194.2 per dry metric ton, reflecting the gradual contraction of global copper mine supply: cumulative global mine output fell by 1.1% year-on-year from January to June, while production in Chile—the leading producer—dropped sharply by 9.4% year-on-year in July. Factors such as unstable operations at South American mines and delayed production resumption at the Grasberg mine have further exacerbated the tightness at the mining stage. Regarding refined copper, domestic electrolytic copper output reached 1.147 million tons in August; while this marked a slight month-on-month increase, it represented a 2.1% year-on-year decline. Smelters remain below the break-even point, and output is expected to dip slightly again in September due to scheduled maintenance at major smelters. In terms of inventory, domestic social inventories of electrolytic copper have fallen to 88,900 tons—a decrease of 51,700 tons compared to the same period last year. On the LME, the proportion of cancelled warrants has surged to 50.92%, keeping the risk of a short squeeze alive. Conversely, COMEX inventories have climbed to historic highs driven by the "siphon effect" of tariffs, further reinforcing the regional supply-demand mismatch characterized by scarcity outside the US and a surplus within the US market.

On the demand side, the market is characterized by overall weakness in traditional sectors alongside structural divergence. The operating rate for refined copper rod producers in August is projected at 64.75%, down 2.26 percentage points month-on-month, while the rate for copper wire and cable manufacturers stands at just 62.25%, as high copper prices continue to dampen downstream purchasing enthusiasm. Air conditioner production schedules have declined year-on-year, leading to weaker operating rates for copper tube manufacturers. However, copper strip and foil sectors have performed robustly, with emerging fields such as new energy, energy storage, and AI data centers providing structural support for copper consumption. As the market enters the traditional peak season in September, essential downstream demand has begun to materialize; following a pullback in copper prices, some downstream enterprises have engaged in bargain hunting to replenish inventories, resulting in a slight month-on-month recovery in refined copper rod operating rates. Although spot premiums have retreated from their highs, they remain within the 300-450 RMB/ton range, indicating that the standoff between tight supply and weak demand has not fundamentally shifted.

Influencing factors:

The "tariff siphon effect" continues to reshape global copper trade flows. Anticipation of US tariffs on refined copper triggered trans-Pacific arbitrage, pushing the price spread between COMEX and LME contracts to nearly $550 at one point; consequently, large volumes of copper flooded into US warehouses, causing LME inventories to drop from 400,000 tonnes in May to around 230,000 tonnes. The scrap copper market faces structural tightness—compliant supply is scarce due to regulatory constraints regarding "reverse invoicing," and the price spread between refined and scrap copper has retreated from a high of 5,410 RMB/ton to the 3,300-3,400 RMB/ton range. Regarding the risk of a market squeeze, LME cancelled warrants account for over 50% of the total, and the deep backwardation in near-term contracts indicates that the tight spot market is unlikely to ease significantly in the short term.

n summary, copper prices fluctuated widely at high levels this week amidst a mix of bullish and bearish factors. On the macro front, the Federal Reserve's hawkish stance and rising expectations for interest rate hikes acted as primary bearish drivers, with a strengthening US dollar exerting downward pressure on prices. Regarding supply, historically low treatment charges (TCs) at the mining stage, a tangible contraction in global copper mine output, and low inventory levels both domestically and abroad collectively established a "hard floor" for prices. On the demand side, the traditional off-season combined with high copper prices dampened downstream purchasing; however, structural demand from sectors such as new energy—alongside expectations for the "Golden September" peak season—offered some room for marginal improvement. Current market pricing logic has shifted from global aggregate supply and demand dynamics to regional imbalances driven by the "siphon effect" of tariffs.

Market outlook

In the short term, the core support factors—namely tight ore supplies and low inventory levels—remain unchanged. While demand during the traditional peak season of September and October awaits verification, copper prices are expected to maintain a pattern of high-level, strong volatility; the reference trading range for the SHFE copper main contract is 108,000-110,000 RMB/tonne, and for LME 3-month copper, it is 14,100-14,500 USD/tonne. In the medium term, attention should be paid to the following marginal changes: the gradual resumption of operations at certain mines after October, a marginal decline in US copper stockpiling demand, and potential macroeconomic shocks should the Federal Reserve implement a rate hike at its September meeting. Regarding trading strategy, the bullish trend for copper prices is likely to persist, driven by supply-side bullish factors; however, given the absolute high price levels, traders must remain alert to high volatility and prioritize risk management. Rising interest rate expectations act as a primary bearish factor, with a strengthening US dollar exerting downward pressure on prices. On the supply side, record-low treatment charges (TCs) for ore, a substantial contraction in global copper mine output, and low domestic and international inventories collectively establish a "hard floor" for prices. On the demand side, the traditional off-season combined with high prices is suppressing downstream purchasing; however, structural demand from sectors such as new energy, alongside expectations for the "Golden September" peak season, offers room for marginal improvement. Current market pricing logic has shifted from global aggregate supply and demand dynamics to regional imbalances driven by tariff-induced effects.

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