On April 15, the copper market exhibited a classic divergence between strong macroeconomic expectations and weak physical market realities. Supported by favorable macro conditions, the main Shanghai copper futures contract (2605) broke through the 102,000 yuan per ton barrier, reaching a high of 103,130 yuan—its highest level in over a month—before settling at 102,090 yuan, up 1,390 yuan or 1.38%. Spot prices also rose sharply, with the Yangtze River Nonferrous Metals Network reporting spot 1# copper at 103,090 yuan per ton, an increase of 1,900 yuan. However, spot premiums narrowed by 20 yuan to 190–230 yuan per ton, reflecting lackluster trading activity. Downstream buyers retreated in the face of high prices, resulting in thin transactions and declining premiums. This disconnect between futures and spot markets underscores copper’s delicate balancing act: while macro sentiment provides upward momentum, weak physical consumption acts as an invisible ceiling.
The sharp rally in copper prices was driven by a rapid shift in macroeconomic narrative, as markets repriced two key variables: easing geopolitical risks and moderating inflation pressures. Statements from former U.S. President Donald Trump suggesting an end to U.S.-Iran tensions, along with signals that Iran might avoid disrupting shipping in the Strait of Hormuz, dismantled the “war premium” that had previously supported oil prices and safe-haven demand. This shift delivered a dual benefit: lower oil prices alleviated cost-push inflation concerns, while improved risk appetite prompted capital flows from safe-haven assets to risk assets. More importantly, an unexpected cooling in U.S. March PPI data—with the annual rate at 4% below expectations and the core monthly rate at just 0.1%—reignited market enthusiasm for “rate-cut bets.” As an interest-rate-sensitive, zero-yield asset, copper’s financial attributes were quickly activated amid a weaker U.S. dollar and falling Treasury yields. Additionally, the People’s Bank of China’s 500 billion yuan reverse repo operation provided ample domestic liquidity, creating a synchronized push that drove copper prices higher on sentiment, detached from fundamentals.
However, a puzzling paradox emerges when examining underlying supply-demand dynamics: despite clearly weak physical consumption in China, copper inventories have declined sharply. On one hand, spot market feedback is unequivocal: while Yangtze spot 1# copper surged by 1,900 yuan to 103,090 yuan per ton, premiums fell by 20 yuan, and trading activity was “unremarkable.” Downstream processors, facing prices above 100,000 yuan, largely adopted a strategy of purchasing only for immediate needs and maintaining a wait-and-see approach, highlighting strong price sensitivity. This indicates that current price levels exceed the comfort zone of real-economy users. On the other hand, inventory data sends a contrasting “strong signal”: Shanghai Futures Exchange copper warehouse stocks fell by 11,400 tons weekly, while social inventories have dropped by over 210,000 tons in two months. This divergence between weak consumption and strong destocking stems primarily from “passive supply contraction.” Factors include strikes at Chile’s Codelco, concentrated maintenance at Chinese smelters in April (affecting 450,000 tons of output), and copper concentrate treatment charges hitting a historic low of -78 USD per dry ton, all constraining refined copper production. In short, inventory drawdowns are driven more by supply disruptions than robust demand. While supply-driven destocking supports price floors, its sustainability is questionable without demand elasticity. More concerning, potential restrictions on sulfuric acid exports and risks in the sulfur supply chain could introduce new “black swans” for copper smelting. If wet-process copper capacity in regions like the Democratic Republic of Congo reduces output due to acid shortages, global copper supply fragility would be further exposed, potentially becoming a hidden driver for future price increases.
Looking ahead, copper prices are caught between a “macro sentiment ceiling” and a “fundamental floor.” Favorable macro conditions provide momentum for a test of the 104,000 yuan resistance level, but spot market weakness and high-price demand suppression suggest any breakout will be volatile. Whether copper extends gains this week hinges on three factors: First, the willingness of capital to sustain the rally—the main Shanghai copper contract saw open interest drop by 8,548 lots, indicating profit-taking at highs. If positions fail to recover, upward momentum may fade. Second, potential “reversals” in geopolitical tensions—any setback in U.S.-Iran talks could quickly reverse缓和 signals around the Strait of Hormuz, triggering sharp price swings. Third, the “sustainability” of inventory drawdowns—if weak consumption persists and destocking slows, copper may face a “price without market” scenario, increasing correction pressures. For investors, chasing rallies is ill-advised. As prices approach 104,000 yuan, profit-taking sell-offs are likely. Near-term support lies around 98,000 yuan; a break below this level would raise risks of a deeper pullback if macro sentiment reverses. In the tug-of-war between “weak reality” and “strong expectations,” caution remains the prudent strategy for navigating high volatility.
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