SunSirs: US Tariffs Were Implemented, COMEX Copper Prices Plummet 20%

Price trend

Data from SunSirs shows that domestic copper prices have fallen slightly recently following the implementation of US tariffs. As of July 31, the price of copper was 78,590 RMB/ton, down 0.92% from the previous day and up 6.55% year-on-year.

US tariffs are implemented, Refined copper (cathode copper) tariffs are exempted

The latest announcement from the White House made it clear that the 50% tariff imposed on August 1st only applies to semi-finished products such as copper pipes, copper wires, copper rods and copper-intensive derivatives (such as cables and connectors), while raw materials such as refined copper (cathode copper, anode copper), copper ore, and concentrate are excluded.

Tariffs on refined copper could be delayed until 2027 (15%) and 2028 (30%), depending on the US Department of Commerce's assessment in 2026.

COMEX copper prices plummeted 20%

The refined copper exemption exceeded market expectations, causing the US copper premium, previously inflated by stockpiling, to rapidly dissipate. On July 31, New York COMEX copper futures plummeted 20% in a single day, and the LME-COMEX spread narrowed significantly from a high of 28%. Copper inventories in US COMEX warehouses surged from 8,936 tons in the same period last year to 212,000 tons (a nearly 24-fold increase). Traders had previously accumulated large amounts of refined copper (US imports surged by 400,000 tons from March to June). The arbitrage logic behind the exemption collapsed, and inventories faced selling pressure, exacerbating downward price pressures with a short-term oversupply.

Uncertainty about the Future of the Federal Reserve's Interest Rate

The Federal Reserve held interest rates steady at its meeting on July 30th, but divisions within the Fed's ranks of doves, hawks, and centrists have intensified, raising uncertainty about future policy. If the Fed delays a rate cut due to inflationary concerns (e.g., tariffs driving up costs), a stronger dollar would directly suppress copper prices. If the Fed signals a rate cut, the US dollar index typically weakens, reducing the cost of holding dollar-denominated copper and boosting copper prices. Recent pressure from President Trump on the Fed to cut interest rates (to 1%) has heightened market expectations for looser policy and reinforced copper's financial attributes.

US-China Trade Negotiations: Extended Truce

Following the Stockholm talks, the US and China agreed to extend the 90-day tariff truce reached in mid-May, but the effective date and duration were not specified. While this progress prevented an immediate deterioration in the situation, uncertainty remains. It is worth noting that the US recently reached trade agreements with the EU ($600 billion) and Japan ($550 billion). Declining external risks may weaken the Federal Reserve's excuse to resist easing policy, indirectly providing support for copper prices.

The US Dollar Index Suppressed Copper Prices

The US Dollar Index (DXY) has recently surged, breaking through the key resistance level of 98.30 points, its 50-day moving average, and reaching 99.14 points (its highest point since June 23rd). This is primarily due to a revision in market expectations for a Federal Reserve rate cut. The strengthening dollar has directly increased the cost of holding dollar-denominated copper, suppressing any potential upside in copper prices.

Fundamentals:

LME copper inventories rose nearly 50% in July

According to data from SunSirs, LME copper inventories have risen sharply recently. As of the 30th, LME copper inventories stood at 136,850 tons, up nearly 50% from 91,250 tons at the beginning of the month.

Supply Side

Domestic copper concentrate processing fees remained low (below -$40/ton), and the tight mine supply situation is unlikely to change in the short term. Grupo México's copper production fell 1.1% year-on-year in the first half of the year, indicating continued disruptions in global mine supply. Holders are offering firm prices. As of July 31, imported copper arrivals were increasing, but domestic supply was limited.

On the Demand Side

During the traditional off-season for consumption, the cable production utilization rate fell to 71% (-2% month-over-month), with air conditioner production and sales sluggish. Only new energy vehicle and power grid investment provided support.

Copper annual price comparison

According to the annual copper price comparison chart, in the past five years, copper prices in August mostly fell first and then rose.

Future outlook:

After the implementation of US tariffs, the easing of US stockpiling has exposed oversupply, potentially leaving the COMEX vulnerable. However, prices in non-US markets (such as the LME and SHFE) remained resilient due to persistent tight supply conditions. Meanwhile, China's off-season demand was sluggish, creating significant short-term downward pressure. However, a peak in domestic smelter maintenance from September to November (affecting approximately 100,000-150,000 tons of production capacity) may exacerbate supply constraints. China's power grid investment increased by 14.6% year-on-year, and the expansion of new energy and AI infrastructure is supporting copper consumption. Annual apparent demand growth is expected to be 4.8%-5.5%, providing some support for copper prices.

As of July 31, copper prices were temporarily oscillating between macroeconomic pressure and fundamental support. Despite pressure from a strong US dollar and weak demand, tight mine supply remained supportive. Copper prices are expected to fluctuate within a range of 78,000-80,500 RMB/ton in the short term, with potential for strengthening in the medium to long term.

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