Copper: Bulls Position for Gains as Rate-Cut Fever Builds, but the ¥79,000 Barrier Still in Question

Macro Drivers: Rate-Cut Expectations and Geopolitical Tensions Intertwined, Weaker Dollar Opens an Upside Window

In early August 2025, the global copper market showed a volatile yet mildly bullish pattern under the combined influence of macroeconomic and fundamental factors. The dovish shift of Fed Vice Chair Bowman and Governor Waller, coupled with soft July non-farm payroll data, lifted market expectations for a 25-basis-point rate cut in September to 90.7%. The U.S. dollar index consequently came under pressure, providing support for dollar-denominated commodities.
Trump's nomination of new Fed board candidates further strengthened expectations of policy easing, while the European Central Bank's delay of its anticipated December rate cut highlighted monetary policy divergence, indirectly influencing copper prices.

On the domestic front, anti-involution policies and pro-growth measures continued to take effect, fueling a recovery in equity markets and boosting overall sentiment. In addition, strong new energy vehicle (NEV) production and sales data (+39.2% YoY from January to July) improved demand expectations, injecting confidence into copper prices. However, the upcoming U.S. tariff exemption deadline (August 13) and uncertainty surrounding U.S.–Russia–Ukraine negotiations kept the market cautious, capping the upside potential for copper.

Supply–Demand Dynamics: Tight Mine Supply and Resilient Consumption in Resonance, Inventory Drawdown Supports Prices

Supply Side: Ongoing Disruptions Abroad, Slow Capacity Release at Home

• Overseas: Chile's Codelco suspended part of its El Teniente operations until August 13 due to a collapse, raising concerns over concentrate supply. Globally, declining ore grades and rising environmental costs continue to constrain production capacity.

• Domestic: Seasonal inventory buildup has been limited (SHFE copper inventory at 81.9 kt, near a historical low for the same period). Global refined copper output remains slow to expand, while refined copper's substitution advantage persists. Spot arrivals are tight, maintaining a premium structure.

Demand Side: Resilient Off-Season Consumption, New Energy Sector Providing Support

• Traditional demand: Power grid investment and home appliance demand remained stable, with rising operating rates among cable manufacturers signaling a "strong off-season."

• Emerging demand: NEV production and sales maintained robust growth (45% penetration in July), driving copper usage in batteries and charging infrastructure. Solar and wind installations rose over 20% YoY, further boosting consumption.

Inventory Trends: Domestic Drawdown vs. Overseas Build-Up

As of August 11, domestic electrolytic copper inventory fell slightly by 1.1 kt to 132.2 kt, led by declines in Shanghai and Guangdong, indicating stronger downstream buying on dips.
In contrast, LME copper stocks continued to climb to a four-month high, but the absolute level remained low, exerting only limited downward pressure on prices.

Technicals and Market Sentiment: Intensified Tug-of-War Around ¥79,000, Bulls Gathering Momentum

Futures Market: SHFE Copper Trending Higher, LME Copper Pulling Back from Highs

• SHFE Copper (2509 contract): Opened higher and closed up 0.74% at ¥79,020/ton, briefly breaking above the ¥79,000 mark before retreating, showing short-term resistance remains.

• LME Copper: Dropped 0.17% to US$9,751/ton during Asian trading hours, pressured by a rebound in the dollar and rising overseas inventories.

Spot Market: Premiums Hold, Trading Cautious

• Yangtze River spot copper: Quoted at ¥79,190/ton, up ¥550, with a premium of ¥200–240/ton.

• Guangdong spot discounts narrowed to ¥130–70/ton, reflecting regional supply–demand differences.
  Despite persistent caution toward high prices, refined rod and cable operating rates have rebounded, underscoring demand resilience.

Key Variables and Trading Strategy

Three Signals to Watch for a Break Above ¥79,000

• Fed rate cut confirmation: A confirmed 25 bps cut in September could weaken the dollar further and push copper higher.

• Mine supply contraction: The pace of Codelco's resumption and other global disruptions will determine the degree of concentrate tightness.

• Demand outperformance: Whether August power grid tenders and NEV sales maintain strong growth will test the sustainability of demand.

Short-Term Trading Strategy

• Longs: If SHFE copper holds firmly above ¥79,000, consider light long positions targeting ¥82,000; if resistance persists, watch ¥78,000 as near-term support.

• Shorts: If LME copper falls below US$9,700/ton, short-term bearish trades may be considered, though domestic policy support could offset downside risks.

Conclusion: Copper Prices Likely to Maintain an Upward Bias Amid Bull–Bear Crosscurrents

The copper market is currently in a phase of resonance between macro easing expectations and fundamental support. The ¥79,000 level serves as both a technical resistance and a psychological threshold.

In the near term, resilient domestic demand, tight mine supply, and rate-cut expectations underpin the bullish case, while overseas stock builds, geopolitical risks, and downstream caution limit gains.

If late-August consumption data continue to improve and mine supply remains constrained, copper prices could break above ¥79,000 and challenge the ¥80,000 mark. Otherwise, a high-level correction risk warrants attention.

Investors should closely monitor this week's U.S. CPI data and Codelco's production recovery progress to adjust positions dynamically.