Chang'an Futures Qu Yajuan: Increased Pressure, Short-term Copper Price May Oscillate Slightly Weak

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In late January, copper prices followed precious metals to reach historic highs, then quickly retreated, with the price center returning to the fluctuation range since January. Recently, copper prices have slightly declined, showing a downward trend.

Be Alert for a Strong Dollar Pressuring Prices

The US-led coalition’s attack on Iran has escalated Middle Eastern geopolitical tensions. The Strait of Hormuz has been blocked, causing a rapid surge in crude oil prices, fueling inflation expectations and dimming the prospects for Fed rate cuts. Meanwhile, US military strength and the dollar’s safe-haven status have been activated, with the dollar index rising above 99, putting pressure on precious metals and base metals. From a long-term perspective, the US aims to strengthen control over the Western Hemisphere, increasing strategic reserves of key raw materials. In the context of global de-globalization and resource protectionism, copper price support remains relatively firm. Economic data shows that in February, US CPI rose 0.3% month-on-month and 2.4% year-on-year; core CPI increased 0.2% month-on-month and 2.5% year-on-year, all in line with market expectations. However, the February data did not reflect the impact of the Iran situation-induced oil price surge.

Tight Copper Mine Supply Difficult to Ease

On the supply side, according to the International Copper Study Group (ICSG), global copper mine production in 2025 is projected at 23.125 million tons, up 167,000 tons or 0.7% year-on-year. Chile, the main producer, saw copper output drop 3% year-on-year to 413,700 tons in January; in February, copper exports were 1.1696 million tons, with 776,600 tons exported to China, both lower than January. Zambia’s mining minister stated that the country is attracting global investment to double copper production by 2031.

Due to insufficient capital expenditure, declining ore grades, and frequent production disruptions, long-term copper mine supply has become a market consensus. Processing fees are under pressure, with long-term concentrate processing fees dropping to $0/ton in 2026. Last week, SMM’s spot TC index for imported copper concentrate fell by $5.62 per dry ton to -$56.05, indicating limited available sources for traders, though many smelters are seeking supplies. The rising price of smelting acid further supports smelters’ procurement sentiment. China’s copper imports in January-February totaled 4.934 million tons, up 4.9% year-on-year. As of last week, copper mine inventories at major ports nationwide stood at 632,700 tons, slightly higher than before the Spring Festival.

Smelters Lack Incentive to Reduce Production

Globally, according to ICSG, refined copper production in 2025 is expected to reach 28.54 million tons, up 1.143 million tons or 4.2% year-on-year, accounting for 57% of global output. Production in China and the Democratic Republic of Congo (DRC) increased by 9%, while other regions declined by 1.8%. Data from the National Bureau of Statistics shows China’s refined copper output in 2025 will grow 10.4% year-on-year to 14.72 million tons. The rapid growth in smelting capacity and high plant operating rates mean the impact of tight ore supply has not yet become apparent.

In February, SMM reported China’s electrolytic copper production at 1.1424 million tons, down 3.1% month-on-month but up 7.9% year-on-year, with no significant reduction due to raw material shortages. March production is expected to increase by about 531,000 tons to around 1.195 million tons, reaching a historic high, supported by ongoing commissioning of new smelting plants. Sulfuric acid prices remain strong, bolstered by Iran tensions, and as a byproduct of smelting, its higher value helps offset losses caused by low copper concentrate processing fees. This reduces smelters’ motivation to cut production temporarily. In the second quarter, raw material shortages will continue to be monitored, and smelters may conduct routine maintenance.

Global Refined Copper Inventories Reach High Levels

Global refined copper stocks have accumulated to high levels. During the Spring Festival, domestic refined copper inventories increased significantly, with SMM’s social inventories rising above 500,000 tons, reaching 579,000 tons as of this Monday, exceeding expectations but gradually slowing. As of last Friday, Shanghai Futures Exchange copper inventories increased by 152,700 tons to 425,100 tons, with warehouse receipts reaching 320,000 tons, both high for the year. After March, SMM’s 1# electrolytic copper spot premium has gradually narrowed, now trading at a slight premium of around 100 yuan per ton. There is no arbitrage opportunity between COMEX and LME; LME copper stocks have rapidly increased from 144,000 tons in mid-January to 312,000 tons, with registered warehouse receipts rising from 94,000 to 276,000 tons, also a significant increase. The spread between the nearby spot and futures widened to about $100 per ton. After reaching 600,000 tons, COMEX copper stocks paused, with warehouse receipts around 376,000 tons, remaining at a high overall level.

Downstream Demand Recovers Quickly

After the Lantern Festival, downstream demand rebounded rapidly. Last week, SMM’s copper rod enterprise operating rate rose sharply to 62.47%. Following price corrections, order volumes from operating enterprises increased significantly. Cable manufacturers’ procurement demand is urgent, with concentrated restocking boosting refined copper rod demand, and enameled wire orders also performed well. The operating rate of cable enterprises recovered to 60.9%. Orders for power grid projects, placed before the festival, are entering delivery periods, accelerating production. Construction-related orders are gradually releasing. Recent terminal data is limited; according to Industry Online, March household air conditioner production is expected at 23.34 million units, down 6.1% from last year’s actual output. In January, China’s auto production and sales reached 2.45 million and 2.346 million units respectively, with production up 0.01% year-on-year and sales down 3.2%. Growth in new energy vehicle production and sales slowed sharply to 2.5% and 0.1%.

Overall, Middle Eastern geopolitical risks have strengthened the dollar and pushed oil prices higher, reducing expectations for Fed rate cuts and exerting some pressure on copper prices. However, in the long term, the strategic reserves of key mineral resources remain prominent. On the supply and demand side, copper mine supply remains tight, smelters are actively procuring raw materials, and processing fees are declining. Supported by sulfuric acid revenue, smelters lack motivation to cut production temporarily. Global refined copper inventories are high, with the spot market slightly oversupplied. Downstream demand is recovering quickly, with attention on terminal performance. Overall, short-term pressure from a strong dollar and high inventories exists, and market focus has shifted to energy and chemicals sectors, likely causing copper prices to fluctuate weakly. Shanghai copper is expected to find support around 97,000–99,000 yuan per ton. For reference only.

Author: Qu Yajuan, Certified Metal Analyst: F03113549, Chang’an Futures.