I. Macro Perspective: Economic data and policy divergence intertwined, strengthening of the US dollar suppresses copper prices
1. The US economy shows resilience, with repeated expectations of interest rate cuts. Strong consumption and employment data: Retail sales in June increased by 0.6% (exceeding expectations by 0.1% and the previous value of -0.9%), core retail growth was 0.5%, indicating a moderate recovery in consumer spending; Initial jobless claims dropped to 221,000 (a new low in three months), while continuing claims stood at 195,600, still at historical lows, and the stable labor market supported consumer confidence.
2. Internal policy divergence within the Federal Reserve intensifies:
- Hawkish stance: Fed Governor Kugler warned that tariffs would push up consumer prices and that restrictive policies were needed to curb inflation expectations, directly pointing to the chain reaction of tariffs on household and electrical goods.
- Pessimistic view: San Francisco Fed President Daly believes that tariffs have a mild impact and supports two interest rate cuts by the end of the year; Fed Governor Warler proposed three reasons for a 25 basis point rate cut in July (temporary inflation due to tariffs, economic growth below potential level, and risks in the labor market), which pushed the volatility in interest rate futures markets (the probability of a 9-month rate cut is 54%, and the probability of action in July rises to 30%).
- The US dollar and US Treasury yields rise: The US dollar index rose by 0.36% to 98.95 on Thursday (the highest since June 23), and the 10-year US Treasury yield was 4.459% (up 23.1 basis points this month), the strengthening of the US dollar suppresses copper prices denominated in US dollars.
3. Global economic growth expectations diverge: The improvement in US retail data in June boosts the prospects of copper demand in sectors such as construction and power, but growth in Europe and emerging markets is weak, coupled with the uncertainty of Trump's tariff policies, suppressing global copper consumption expectations.
II. Supply and Demand基本面： Loose supply and differentiated demand limit the upward space of copper prices
1. Supply side： Global mining output has increased, and production capacity has been released in the smelting sector. Significant increase in overseas supply： Kazakhstan's refined copper output increased by 3.6% year-on-year from January to June; Global copper production increased by 190,000 tons (+5.1%) from January to April, with the restart of mines such as Kipushi and Antamina driving an increase of over 600,000 tons in 2025, the trend of loose supply from the mining sector is clear. China's output reached a new high： refined copper output in June increased by 14% year-on-year, reaching a new high; The profit recovery in the smelting sector (processing fee rose to 3,600 yuan/ton) pushed the operating rate to 95%, and the production of new capacity in the second half of the year is expected to further loosen the supply of copper concentrate.
2. Demand side： Domestic demand resilience vs. external demand pressure
- Stable infrastructure demand： High growth in the power sector and significant improvement in public facilities, 1-5 months of special bond issuance was 1.9 trillion (+27.9%), continuously boosting infrastructure copper demand.
- Continued drag from real estate： Sales and completion declines have narrowed, but new construction has not improved, and it is expected that the proportion of copper used in real estate will further decline.
- Automobile and household appliances： 1-5 months of automobile production +12.7%, sales +10.9%, and exports +7.8%, but the consumption lead effect may lead to a slowdown in growth in the second half; Household appliance production saw a significant decline in growth rate in April (refrigerators turned negative year-on-year), and the demand throughout the year shows a trend of higher in the beginning and lower in the end.
- Facing tariff pressure from the US on Chinese copper products (effective from August 1st), the effect of forced export has declined, and demand may be under pressure after policy implementation.
III. Inventory Dynamics： LME accumulation and保税 zone de-accumulation, market contradictions are prominent
1. LME inventory surge： Since the US announced the copper tariff plan, LME copper inventory increased by 70% to 122,200 tons (the highest since April 30), easing short-term supply concerns, but limiting the upward space of copper prices. 2. Domestic bonded zone inventory withdrawal: On July 17th, the copper inventory in Shanghai and Guangdong bonded zones was 73,900 tons (a decrease of 0.08万吨 per week). Some of the supplies were exported overseas, indicating the resilience of domestic demand. However, the overall inventory remains at a relatively high level.
