Copper prices reached a historic high in late January, following precious metals, before rapidly retreating. The price center has returned to the fluctuation range observed since January. Recently, the price center has shifted slightly lower, showing a tendency to test lower levels.
Investors should be cautious of the strengthening US dollar exerting downward pressure. Following joint US-Israeli military strikes against Iran, geopolitical tensions in the Middle East escalated, leading to the blockade of the critical global chokepoint, the Strait of Hormuz. This caused crude oil prices to surge rapidly, fueling inflation expectations and dimming prospects for Federal Reserve interest rate cuts. Concurrently, the demonstration of US military strength activated the US dollar's safe-haven appeal, pushing the dollar index above 99 and putting pressure on precious metals and non-ferrous metals broadly. From a long-term perspective, the US has strategic objectives to strengthen its influence in the Western Hemisphere, enhancing the strategic reserve value of key raw materials. Against the backdrop of deglobalization and resource protectionism, the downside support for copper prices remains relatively firm. Regarding economic data, US February CPI rose 0.3% month-on-month and 2.4% year-on-year, while core CPI increased 0.2% monthly and 2.5% annually, all meeting market expectations. However, the February data did not reflect the impact of the oil price surge triggered by the Iran situation.
Tight copper concentrate supply shows little sign of easing. On the mine supply side, according to the International Copper Study Group (ICSG), global copper mine production in 2025 is projected at 23.125 million tonnes, a slight increase of 167,000 tonnes or 0.7% year-on-year. In major producer Chile, January copper output fell 3% year-on-year to 413,700 tonnes. Chile's copper concentrate exports in February were 1.1696 million tonnes, with exports to China at 776,600 tonnes, both declining compared to January. Zambia's mining minister stated the country is attracting global investors to triple its copper production by 2031.
Factors such as insufficient capital expenditure, declining ore grades, and frequent production disruptions have led to a market consensus that long-term copper mine supply will remain tight, putting pressure on treatment charges. The annual benchmark treatment charge for copper concentrate in 2026 has been set at $0 per tonne. Last week, the SMM imported copper concentrate spot TC index fell by $5.62 per dry metric tonne to -$56.05/dmt. Traders have limited available material for sale, while many smelters are actively inquiring. Rising sulfuric acid prices further support smelters' willingness to purchase copper concentrate. China's cumulative copper concentrate imports for January-February reached 4.934 million tonnes, up 4.9% year-on-year. As of last week, SMM data showed copper concentrate inventories at major Chinese ports were 632,700 tonnes, slightly higher than pre-Spring Festival levels.
Smelters lack strong motivation for output cuts. Globally, according to ICSG, total refined copper production in 2025 is forecast at 28.54 million tonnes, an increase of 1.143 million tonnes or 4.2% year-on-year. Production in China and the Democratic Republic of Congo, which account for 57% of global output, grew by 9%, while output in other regions declined by 1.8%. Chinese statistics bureau data shows China's refined copper output in 2025 grew 10.4% year-on-year to 14.72 million tonnes. Due to rapid growth in smelting capacity and high operating rates at smelters, the impact of tight concentrate supply has not been significantly felt yet.
SMM data shows China's electrolytic copper output in February was 1.1424 million tonnes, down 3.1% month-on-month due to seasonal low demand, but up 7.9% year-on-year. No significant production cuts due to raw material shortages were reported. March output is forecast to increase by 53,000 tonnes month-on-month to approximately 1.195 million tonnes, a historically high level, with few maintenance shutdowns and newly commissioned smelters continuing to ramp up production. Sulfuric acid prices have remained firm this year, with the Iran situation further enhancing their price resilience. As a by-product for smelters, its revenue helps offset losses caused by low copper concentrate treatment charges, thereby reducing smelters' immediate incentive for maintenance shutdowns or output cuts. After the second quarter, the raw material tightness will be monitored further, and smelters may schedule routine maintenance.
Global refined copper inventories have risen to high levels. Visible refined copper inventories globally have accumulated significantly. During the Spring Festival holiday, domestic refined copper inventories increased substantially, with SMM social inventories quickly climbing above 500,000 tonnes. As of this Monday, inventories reached 579,000 tonnes, exceeding expectations for the accumulation pace, though the rate of increase is gradually slowing. As of last Friday, total copper inventories on the SHFE rose to 425,100 tonnes, an increase of 152,700 tonnes from pre-holiday levels. The latest warrant inventory accumulated to 320,000 tonnes, both at high levels for the same period in previous years. After March, the spot discount for SMM 1# electrolytic copper gradually narrowed and has now shifted to a slight premium. The Yangtze River Nonferrous 1# copper price turned to a premium of around 100 yuan/tonne. With no arbitrage opportunity between COMEX and LME, LME copper inventories have accumulated rapidly. Total LME stocks increased from 144,000 tonnes in mid-January to the latest 312,000 tonnes, while registered warrants rose from 94,000 tonnes to 276,000 tonnes, a significant increase. The LME cash-to-3-months discount widened to around $100 per tonne. COMEX copper inventories paused their climb after reaching 600,000 tonnes, with warrant stocks around 376,000 tonnes, remaining at an absolute high level overall.
Downstream demand has recovered relatively quickly. After the Lantern Festival, downstream demand rebounded swiftly. Last week, the operating rate of SMM-monitored refined copper rod enterprises quickly recovered to 62.47%. Following the copper price correction, orders at resumed enterprises generally increased substantially. Urgent delivery demands from downstream cable companies and concentrated restocking boosted refined copper rod demand, while enameled wire orders also performed well. The operating rate for copper cable enterprises recovered to 60.9%, as grid orders placed intensively before the holiday entered a concentrated delivery period, accelerating production pace. Engineering project orders are also gradually being released. Recent terminal data is limited. According to industry data, planned household air conditioner production in March is 23.34 million units, down 6.1% compared to actual production in the same period last year. In January, Chinese automobile production and sales reached 2.45 million and 2.346 million units respectively. Production increased 0.01% year-on-year, while sales decreased 3.2% year-on-year. Growth rates for new energy vehicle production and sales slowed significantly to 2.5% and 0.1% respectively.
Overall, Middle East geopolitical risks have strengthened the US dollar, and rising oil prices have cooled expectations for Fed rate cuts, exerting slight pressure on copper prices. However, from a long-term view, the reserve value of key mineral resources remains prominent. On the supply-demand front, tight copper concentrate supply is difficult to alleviate, with smelters actively procuring raw materials and treatment charges declining. Supplemented by sulfuric acid revenue, smelters currently lack strong motivation for output cuts. Global refined copper inventories have risen to high levels, with the spot market generally slightly loose. Downstream demand has recovered quickly, and terminal performance warrants attention. In summary, short-term pressure from a strong US dollar and high inventories is increasing. Furthermore, with market focus shifting towards energy and chemicals, copper prices may trend slightly weaker with fluctuations. Support for SHFE copper is temporarily observed near the 97,000 - 99,000 yuan/tonne range. This analysis is for reference only.
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