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Pressure from Increased Supply and Weak Demand Improvement

In recent times, the copper market has seen new dynamics in both supply and demand, influenced by multiple factors. From the supply perspective, this week, spot treatment charges (TC) for copper continue to rise as smelting capacity recovers both domestically and internationally, driven by favorable refining margins. This has led to an increase in copper supply, which in turn puts downward pressure on copper prices due to supply-demand imbalances.

The situation of ample supply at the mining end and its impact on copper price trends: Despite global mineral resource constraints, current mining supply remains ample. This is primarily due to the gradual resumption of production by some major mining companies and the commissioning of new mines. However, the loose supply at the mining end does not necessarily mean copper prices will fall, as copper price trends are also influenced by other factors such as changes in demand and macroeconomic conditions.

Gradual inflow of imported copper and the trend of widening domestic supply: Since September, with the gradual inflow of imported copper, domestic copper supply has shown a trend of widening. This is partly due to the recovery of production capacity at some smelters and the commencement of new domestic projects. However, the increase in domestic supply does not necessarily indicate a decline in copper prices, as copper price trends are also influenced by demand-side factors.

Demand Analysis:

Reasons for the continued increase in refined copper rod product inventories and their impact on copper price trends: Recently, driven by factors such as new infrastructure projects in China, there has been an increase in demand for refined copper rods. However, at the same time, the recovery of production capacity at some smelters has increased supply, leading to an increase in inventories of refined copper rod products. Although the increase in inventories exerts pressure on copper prices, the demand for copper rods is expected to continue growing, driven by factors like new infrastructure projects.

Maintenance of the “matching procurement and sales” strategy by recycled copper rod companies and its impact on copper price trends: Currently, recycled copper rod companies are generally adopting a “matching procurement and sales” strategy, adjusting their purchasing and sales strategies based on actual demand. The impact of this strategy on copper price trends primarily manifests in changes in demand. While the “matching procurement and sales” strategy by recycled copper rod companies helps maintain relative supply-demand balance in the market, its impact on copper prices is limited.

The lackluster performance of the consumption peak season in the first week of September and its impact on copper price trends: With September marking the traditional peak consumption season, market performance has been less than expected. One of the main reasons is that some downstream enterprises pre-purchased in anticipation of the peak season, resulting in lower-than-expected actual consumption. Nevertheless, the consumption peak season is still expected to drive copper prices upward in a bullish phase.

Summary:

Copper prices this week have generally been under pressure. On the supply side, the continuous rise in spot treatment charges, ample supply at the mining end, and the gradual inflow of imported copper have all contributed to increased copper supply. On the demand side, the increase in inventories of refined copper rod products, the “matching procurement and sales” strategy by recycled copper rod companies, and the lackluster performance of the peak consumption season have all restricted the growth of copper demand. However, considering factors like new infrastructure projects and the anticipation of the consumption peak season, copper prices are still expected to experience an upward trend in the short term. Nevertheless, given the uncertainties related to monetary policies and economic prospects, copper prices still face significant downward pressure in the future.

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