The spot price for 1# copper on the Yangtze River market was reported at 105,270 yuan per tonne on June 18, down 380 yuan, with the premium holding steady at 120 yuan per tonne.
This price action accurately reflects the extreme contradictions currently facing the copper market: on one side, a "hawkish pivot" from the Federal Reserve's dot plot has sent the U.S. dollar soaring, suppressing copper's financial attributes; on the other, a persistent negative global copper concentrate TC and coordinated production cuts by smelters are creating physical scarcity.
The market closing with a bearish candle on the final pre-holiday trading session is more a result of capital seeking safety and the release of macro pessimism than a signal of fundamental breakdown.
Looking ahead post-holiday, I believe excessive pessimism is unwarranted. Instead, focus should shift to the recovery opportunities arising from supply-demand mismatches in the industrial sector once the macro headwinds have been priced in.
Macro Landscape: Hawkish Debut Spurs Valuation Correction, But Marginal Impact is Fading
The debut of the new Fed Chair, Walsh, indeed delivered a cold shower to markets.
While the interest rate decision remained unchanged, the dot plot showing nine officials projecting a rate hike this year, coupled with the removal of hints about future cuts from the forward guidance, triggered a sharp turnaround in stance that directly ignited a rally in the U.S. dollar index and Treasury yields.
For dollar-denominated copper, this is undoubtedly the biggest short-term negative, leading the main Shanghai copper futures contract to oscillate lower, closing the afternoon session at 104,590 yuan per tonne, down 700 yuan or 0.66%.
However, from an industrial analysis perspective, we must look beyond the surface.
First, the market had largely anticipated this move; post-selloff panic in stocks and bonds is often transient.
Second, while macro pressures exist, they do not alter the long-term trend of globally accommodative liquidity.
More importantly, as the "king of industrial metals," copper's pricing power is gradually shifting from a purely financial attribute to a dual attribute of "resource + technology."
Once the macro sentiment is fully vented, market focus will return to physical supply and demand.
Industrial Fundamentals: Supply Crunch at the Mine Level and AI Demand Reshaping Valuations
This is the core logic supporting copper's high price volatility and the key to a potential post-holiday market reversal.
Extreme tightness in raw materials: Copper concentrate treatment and refining charges have plunged deep into negative territory, meaning smelters lose money on every tonne of copper produced.
Facing this reality, China's CSPT group is promoting expansion and strictly enforcing coordinated output cuts, with major smelters proactively controlling production and scheduling intensive maintenance as the new norm.
WBMS data shows a global refined copper surplus of only 10,700 tonnes in April. Considering the actual scale of smelter cuts, future refined copper output will be far below theoretical capacity.
This cost-driven supply contraction is more rigid than any administrative order.
Structural boom in demand: While traditional sectors like property and home appliances are in a seasonal lull, "new quality productive forces" are filling the gap.
The explosive growth in AI computing hardware has made copper-clad laminates and high-frequency, high-speed copper foil essential components.
The surge in shares of Jiangxi Copper Co Ltd and activity in the PCB sector within the A-share market reflect capital markets re-pricing copper as a "core AI consumable."
Actions by major players, such as Macquarie Bank significantly raising its copper price forecasts for 2026-2028 and BHP Group Ltd divesting non-core assets to focus on copper, all point to the same conclusion: the long-term copper bull cycle remains unchanged.
Inventory and spot market resilience: Despite pressure on futures, the spot market remains firm.
Social inventories continue to draw down, and holders show strong price support willingness amid low stockpiles.
This indicates downstream demand exists; it's just that buyers are employing a "buy on dips for essential needs" strategy under high prices. Once prices correct, buying interest emerges.
Geopolitical and Policy Factors: External Disturbances Provide a Safety Net
New LME rules on registering Russian copper and cobalt warrants, along with the fluctuating U.S.-Iran situation, add uncertainty to trade friction but objectively intensify the tightness of non-Russian copper resources.
Furthermore, China's classification of copper as a strategic mineral and the formation of smelter purchasing alliances for collective bargaining provide a solid bottom support for copper prices from both policy and industrial chain perspectives.
Market Outlook and Trading Suggestions
Market Outlook: The pre-holiday bearish close resulted from a combination of macro sentiment and profit-taking.
Looking post-holiday, as the Fed's hawkish signals are digested by the market, macro pressures will gradually ease.
At that point, the "strong reality" of the industrial sector—namely, expectations of refined copper production cuts due to mine tightness and incremental demand from AI—will regain pricing dominance.
It is expected that after testing support around the 104,500 yuan per tonne level, the main Shanghai copper contract may stabilize and rebound, resuming its upward trajectory. In the long run, the price center for copper will continue to shift higher.
Trading Suggestions: For short-term trading, given that pre-holiday risk aversion has not fully dissipated, chasing highs is not advisable.
Monitor support levels in the 104,500-105,000 yuan per tonne range. If stability is confirmed, consider light long positions with a stop-loss set below 104,000 yuan per tonne.
For medium-term positioning, the current pullback presents a rare opportunity for industrial clients and long-term investors to establish positions.
Focus on companies with proprietary mine resources or those integrated into the AI computing copper foil supply chain, as these targets possess the dual logic of "resource revaluation" and "growth realization."
Risk Control: Closely monitor the movement of the U.S. dollar index and the actual implementation of domestic smelter production cuts.
Should the dollar continue its uncontrolled rise or if production cuts fall short of expectations, timely adjustment of long positions is necessary.
In summary, the copper market is in a phase of contention between "macro headwinds" and "industrial tailwinds."
The pre-holiday bearish candle represents darkness before the dawn. Driven by the dual engines of resource scarcity and technological empowerment, the long-term upward trend for copper prices remains clear.
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