Global copper prices experienced a sudden and sharp rally on August 6, driven by a significant policy announcement. The London Metal Exchange (LME) copper futures contract surged, with gains momentarily expanding to 1.8%, reaching its highest level since January and trading at $14,241 per metric ton.
The rally was triggered by a new administrative directive from the Democratic Republic of the Congo (DRC), which has implemented a complete ban on the export of copper and cobalt concentrates. In addition, the DRC government introduced a new tax framework that imposes a levy on economically valuable mining by-products, with a valuation coefficient set at 55%. This new tax structure is scheduled to take effect in three months.
Analysts suggest that the global supply of copper is tightening, as major producers reported lower output in the first half of the year, fueling expectations for a revaluation of copper prices. According to data from CICC, as of August 3, the 15 mining companies that have published their operational results saw a combined 5% year-on-year decline in copper production, primarily due to production disruptions and declining ore grades. During the same period, China's copper ore imports fell by 1% year-on-year, with port inventories dropping to a three-year low. Stricter scrap copper recycling regulations have also contributed to a slowdown in refined copper production growth.
The approaching deadline for potential US copper tariff policies, combined with the upcoming traditional peak demand season in China and a significant destocking of inventories in non-US markets, points to a tightening supply-demand balance that could push copper prices higher. Over the long term, insufficient capital expenditure is constraining supply growth, while demand from new industries, new regions, and new inventory cycles is keeping the global copper market in a persistent deficit. Currently, the copper sector in the A-share market is trading at the 27th percentile of its historical valuation over the past decade, highlighting its investment appeal.
A research report from Guangzhou Futures notes that LME copper inventories are accelerating their decline, with a high proportion of canceled warrants indicating a tight spot market and growing sentiment for a squeeze. While downstream demand in China during the traditional off-season is primarily for essential needs, leaving little impetus for restocking, the expectation of strong consumption during the upcoming peak season provides support from low inventory levels. The report suggests that the market is likely to see more upward than downward movement in the short term, recommending a cautiously bullish stance.
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