1.Copper Prices Volatility Increased

Macro side, the US stock market showed weakness again, indicating that investors' expectations of a US recession have intensified, especially with the rebound in short-term inflation expectations, while stagflation expectations remain unchanged. However, two voting members of the US Fed and Fed Chairman Powell hold differing views on inflation expectations, believing that tariffs have a non-transitory impact on inflation and that long-term inflation issues should be focused on. The timing of interest rate cuts may be longer than expected, showing a slightly hawkish stance. Domestically, China's Ministry of Finance stated that fiscal policy in 2025 will be more proactive, with an increase in the fiscal deficit ratio and the arrangement of a larger scale of government bonds, aiming to support comprehensive expansion of domestic demand in 2025.

The market has begun to expect that the new US president will impose a 25% tariff on copper. Before the policy is implemented, US copper has consistently outperformed other markets, accompanied by the widening of the price spread between US copper and LME copper, driving global copper prices higher and becoming the "engine" of the market. However, judging from yesterday's performance, before the implementation of reciprocal tariffs on April 2, uncertainty has also led to some bulls exiting the market, and the market is also easing pressure in advance. Therefore, during this period, copper prices may fluctuate and volatility may increase, and the performance before and after may determine the later rhythm. Domestically, the center of spot premiums/discounts quotations will slowly rise, but the actual change in absolute prices will focus more on the performance of US copper and LME copper.

2.Auto Tariffs Hit, Copper Prices Adjust at High Levels

On Wednesday, the most-traded SHFE copper 2505 contract continued to rise, while LME copper pulled back at the key level overnight. The COMEX copper premium expanded to above $1,500. The domestic near-month April-May price spread turned to parity. The spot copper market was inactive on Wednesday, as downstream buyers were cautious about the rapid rise in copper prices and mainly adopted a wait-and-see approach. Spot prices fell to a discount of 20 yuan/mt. Yesterday, LME inventory dropped to 217,000 mt.

On the macro front, the US President announced a tariff of up to 25% on all cars and specific parts not manufactured in the US, which will gradually increase from the base rate of 2.5%. He stated that the auto tariffs are permanent measures with no room for negotiation or exemption. The news weighed on market sentiment, and the US dollar rebounded, putting pressure on metals. The Canadian Prime Minister said that the US tariffs are a direct attack on Canadian workers and seriously violate the rules of the USMCA. He will speak with the US President as soon as possible. The President of the St. Louis Fed warned that the impact of tariffs on US inflation may not be short-lived, and the US Fed may need to maintain higher interest rates for a longer period. Trade barriers will have a more lasting second-round effect on the underlying inflation of importing countries.

On the industry front, according to foreign media reports, Glencore suspended copper shipments from its Altonorte smelter in Chile due to issues with the smelting furnace. In 2024, Altonorte's refined copper production reached 349,000 mt.

The US auto tariffs have been implemented with no room for negotiation or exemption. US Fed officials stated that trade barriers will have a more lasting second-round effect on the underlying inflation of importing countries. The US dollar rebounded, causing US copper to jump initially and then pull back. On the fundamentals side, tightening mine supply provides strong cost support, and domestic destocking has begun. Technically, LME copper faces resistance at the key level. It is expected that copper prices will enter a high-level consolidation in the short term, with the risk of a rapid pullback from high levels in the medium term. 

3.Trade tariffs disrupted the market, and copper prices were under pressure and declined overnight

March 27 News: Overnight, LME copper opened at $9,942/mt, reaching a high of $9,971/mt during the session, and a low of $9,900/mt at the end of the session, closing at $9,907/mt. The overall trend initially fluctuated upward before pulling back. The decline was 1.86%, with a trading volume of 31,000 lots and open interest of 303,000 lots. Overnight, the most-traded SHFE copper 2505 contract opened at 81,670 yuan/mt, reaching a high of 81,870 yuan/mt and a low of 81,350 yuan/mt during the session, closing at 81,520 yuan/mt. The overall trend fluctuated downward. The decline was 1.08%, with a trading volume of 62,000 lots and open interest of 240,000 lots. On the macro front, Trump announced a 25% tariff on imported cars on Wednesday, and insiders revealed that the US would accelerate the imposition of copper tariffs, several months ahead of the expected timeline. This has raised concerns about escalating trade tensions and a slowdown in global economic growth. The uncertainty brought by the copper tariffs pushed Comex copper prices to a new historical high, and the price spread between Comex and LME copper continued to widen. On the fundamental side, supply side, copper prices surged sharply in the early session yesterday, with significant fluctuations in suppliers' hedging positions, putting pressure on their willingness to sell, leading to a relatively deadlocked supply side. Demand side, downstream buyers showed weak pricing intentions, with only a small amount of just-in-time procurement maintained. Copper prices fluctuated significantly during the day, and market trading volume noticeably weakened, with overall demand performance being mediocre. Price-wise, copper prices are expected to continue their downward trend today, but the overall downside space is limited.

4.BC Copper Rallied Then Retreated, Closing with a Bullish Doji Star

Today, the international copper 2505 contract opened at 73,080 yuan/mt, closing with a doji star, indicating a reduction in short positions. Overnight, the most-traded BC copper 2505 contract started fluctuating upward after opening, with short covering and long entry, continuously pushing the price center higher. During the morning trading session, the price once climbed to a high of 74,290 yuan/mt, with strong bullish sentiment in the market. However, profit-taking by longs quickly followed, causing futures prices to plummet, erasing all intraday gains, and touching a low of 72,810 yuan/mt, eventually closing at 73,090 yuan/mt, up 0.29%. In terms of trading and open interest data, the day's trading volume was 16,155 contracts, with open interest reaching 11,251 contracts, a decrease of 154 contracts from the previous trading day.

On the macro front, the US Conference Board Consumer Confidence Index for March was 92.9, the lowest since January 2021. This data suggests a slowdown in economic consumption, dampening the rise of the US dollar index. Meanwhile, due to expectations that the Trump administration will impose a 25% tariff on copper semis imports, market concerns about future import cost increases have led global copper suppliers and traders to rush to ship copper to the US before the tariff takes effect, driving COMEX copper prices to surge and boosting international copper prices significantly.

The SHFE copper 2505 contract closed at 82,000 yuan/mt. Based on the international copper 2505 contract price of 73,090 yuan/mt, its post-tax price is approximately 82,592 yuan/mt. The price spread between the SHFE copper 2505 contract and the international copper 2505 contract is -592 yuan/mt, maintaining an inverted spread and narrowing compared to the previous trading day.

5. Refined Copper Rod Exports Steadily Increased YoY in January-February: Is Processing Trade a Flash in the Pan or the Future Mainstream? 

Since the end of November 2024, the export market for copper wire rod has gradually transitioned from Ordinary Trade to processing trade. Whether the exponential growth in processing trade is a temporary response to market changes or the future mainstream of the market, the import and export data for January-February 2025 released by the customs platform will be analyzed by SMM in combination with the actual market situation as follows: According to customs data, after the exports of refined copper rod (>6mm) under processing with imported materials and processing with supplied materials increased by 12.2 and 9.4 times MoM in December, the volume of processing trade continued to grow in January-February, with the total volume increasing month by month. Specifically, the total exports of refined copper rod (>6mm) in January 2025 increased to 4,364.3 mt from 3,903.1 mt in December 2024, up 11.8% MoM. In February 2025, the total exports of refined copper rod (>6mm) further increased by 14.6% MoM from January 2025. The total exports of refined copper rod (>6mm) in January-February 2025 reached 9,364.65 mt, up 43.9% YoY from January-February 2024. Notably, driven by policy, significant changes occurred in the volumes of processing with imported materials, processing with supplied materials, and Ordinary Trade. In January-February 2025, the exports of refined copper rod (>6mm) under processing with imported materials reached 8,844 mt, up nearly 105 times YoY, while the exports under processing with supplied materials increased from 0 to 45 mt, and the volume of Ordinary Trade was only 2% of the same period. Additionally, the volume of Entrepot Trade by Customs Special Control Area decreased to 0 in February as the market adjustment period ended. On the other hand, the exports of refined copper wire (≤6mm) in January-February 2025 also showed significant growth compared to December 2024, with increases of 60% and 7% MoM in January and February, respectively. On a YoY basis, the total exports of refined copper wire (≤6mm) in January-February 2025 increased by 51.47% YoY from January-February 2024. Similarly, driven by policy, the volumes of processing with imported materials, processing with supplied materials, and Ordinary Trade for refined copper wire (≤6mm) in January-February 2025 also showed significant changes. The exports of refined copper wire (≤6mm) under processing with imported materials reached 7,668.2 mt, up 12.4 times YoY, while the exports under processing with supplied materials increased by 18.69% YoY, and the volume of Ordinary Trade decreased by 57% YoY. In summary, based on the data and actual market situation, the export market for copper wire rod has now fully transitioned to processing trade, not just a temporary phenomenon under the change in tax policy. Mainstream enterprises in the market have basically maintained stable export volumes, and as more refined copper rod enterprises apply for processing manuals and actively expand overseas markets, coupled with the significant increase in oxygen-free rod exports, the export volume in January-February 2025 maintained growth both YoY and MoM. With the export window open, it is expected that high export volumes can be maintained in the future, and the export volume of copper wire rod in 2025 may achieve a total volume similar to 2024, excluding the impact of policy changes.