1、 Trend analysis
According to monitoring data from Shengyi Society, on March 6th, copper prices rose strongly, with a daily increase of over a thousand yuan, reaching 78323.33 yuan/ton, a daily increase of 1.93%. Copper prices have been fluctuating upwards since early January this year, rising 6.09% from the beginning of the year and reaching a new high in nearly May. Copper prices in the New York market surged by over 5% on Wednesday, further surpassing other global benchmark prices. The source of this copper market storm lies directly in US President Trump’s remarks about the possibility of imposing high tariffs on imported copper, which quickly triggered a chain reaction in the market, pushing up US copper prices and further surpassing the global benchmark London copper price.
Multiple favorable factors
US tariffs trigger market volatility
In his speech to Congress on Tuesday, Trump mentioned imposing tariffs on copper, and traders are concerned that the tariffs may be higher than expected and come earlier, triggering a crazy rise in copper prices on the New York Mercantile Exchange (Comex) during the Asian session. Market participants generally believe that once import copper tariffs are implemented, it will limit the supply of copper and push up prices. This concern quickly spread in the market, triggering panic buying by investors and exacerbating the upward trend of copper prices.
weaker dollar
The expectation of a Federal Reserve interest rate cut has heated up, leading to a depreciation of the US dollar. The weakening of the US dollar has made commodity prices denominated in US dollars relatively cheaper, attracting more international buyers to enter the market and further driving up demand for copper.
Geopolitical events
Geopolitical events, such as the Russia-Ukraine conflict and the US China trade friction, exacerbated the market’s concern about the stability of the supply chain, and promoted the flow of safe haven funds into the bulk commodity market.
Policy stimulus
China has launched fiscal stimulus measures, such as large-scale equipment upgrades, while Germany plans to establish a 500 billion euro infrastructure fund. Coupled with expectations of interest rate cuts by the Federal Reserve and a weakening of the US dollar, this has boosted the financial attributes and industrial demand for copper.
By 2027, the demand for copper in data centers may account for 3.3% of global copper demand (compared to only 5.2% for electric vehicles), which will drive up copper prices and have a profound impact on the global copper market.
Mining production interruption
Several major copper mines around the world, such as the Cobre copper mine in Panama, have suspended production due to environmental protests or policy issues, and strikes in Chile and Brazil have also affected production. Mining giants such as Anglo American Resources have lowered their production targets, resulting in a slowdown in the growth rate of copper concentrate supply.
Smelting costs and inventory pressure
The copper concentrate processing fee (TC) continues to decline to negative values, putting pressure on smelters’ profits. Although refined copper production has not significantly decreased, the expected tightening of raw materials is heating up. The continuous decline in spot inventory of electrolytic copper in China further exacerbates supply concerns.
Demand side: driven by new energy and electrification
The global energy transition is accelerating, with a surge in investment demand for electric vehicles, photovoltaics, and the power grid. As the largest consumer of copper, China’s power grid investment and new energy policies (such as equipment renewal action plans) directly drive copper demand. Electrification demand is expected to account for over 50% of the global increase in copper consumption by 2025.
LME copper inventory
According to the above chart, LME copper inventory has been slightly decreasing since late February. As of the 6th, LME copper inventory was 259175 tons, a decrease of 4.49% from the beginning of the year.
According to the annual copper price comparison chart, in the past five years, the copper price trend in March has mostly been positive.
Market forecast:
In summary, the recent increase in copper prices is the result of multiple drivers including policies, supply and demand, finance, and geopolitical factors. Trump’s tariff policy has not yet been officially implemented, and its uncertainty remains significant. In addition, the complex and volatile global economic situation may also have an impact on the future trend of copper prices. It is expected that copper prices will remain strong in the short term, and in the future, attention should be paid to the effectiveness of China’s policies, the actual impact of US tariffs, and the recovery of mining capacity.
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