Tight Supply and Strong Demand Keep Copper Elevated Despite Policy Headwinds

Copper prices edged higher in the past 24 hours, with official data showing the COMEX front-month contract closing at $4.9130 per pound on June 25.

The London Metal Exchange (LME) cash price settled at $9,810 per metric ton, while Shanghai Futures Exchange (SHFE) contracts hovered near 78,300 yuan per ton.

These levels reflect a market grappling with both persistent supply constraints and shifting macroeconomic signals. LME inventories continued their steep decline, dropping to 93,475 tons—a fall of nearly 14,000 tons in just the past week.

This ongoing drawdown signals real tightness in physical supply, not just speculative positioning. The cash-to-three-month spread on the LME remains deeply in backwardation, indicating buyers are willing to pay a premium for immediate delivery.

This pattern points to genuine stress in the supply chain, as confirmed by the sharp drop in warehouse stocks since February. On the demand side, Chinese buying remains steady, supported by a stronger yuan and recent policy easing.

The People’s Bank of China cut key lending rates, boosting liquidity and supporting factory activity. These moves have helped offset concerns about global growth and manufacturing demand.

However, the US market has seen a flood of imports as traders rush to beat potential tariffs, narrowing the price gap between US and international copper.

The premium for US-delivered copper over LME prices has collapsed from $1,600 to $600 per ton in recent weeks, reflecting the impact of increased shipments into the US.

Macroeconomic factors continue to influence sentiment. The US dollar weakened further, making copper more attractive to buyers using other currencies. This currency shift, combined with a firming yuan, has increased China’s purchasing power for imported copper.

At the same time, Federal Reserve statements have injected uncertainty. Chairman Powell signaled caution on interest rate cuts due to inflation risks tied to tariffs, but did not rule out future easing if inflation pressures subside.

Copper Steadies Around $5 Amid Bullish Momentum

Technical analysis of the four-hour and daily charts shows copper holding above key moving averages, with the price consolidating near $5.00 per pound.

The Relative Strength Index (RSI) on the four-hour chart stands at 67, signaling strong momentum but approaching overbought territory. The Moving Average Convergence Divergence (MACD) indicator confirms bullish momentum.

It shows a positive crossover and an expanding histogram. Bollinger Bands reveal price hugging the upper band, reflecting heightened volatility and potential for short-term pullbacks.

Volume remains robust, validating recent price moves. LME trading volumes reached over 21,000 lots, and SHFE activity stayed strong at nearly 25,000 lots. These figures indicate active positioning as traders respond to both fundamental and technical signals.

Fundamentally, the market faces a tug-of-war between rising mine supply and persistent supply chain bottlenecks. The International Copper Study Group forecasts a global surplus of 289,000 tons in 2025, driven by new mine projects in Africa, Mongolia, and Russia.

Yet, the immediate squeeze in exchange inventories and strong spot demand suggest that any surplus remains theoretical for now. In summary, copper’s resilience reflects a market balancing real-world supply stress with macroeconomic crosscurrents.

Price action remains range-bound but elevated, with technical indicators hinting at further volatility. Traders will watch central bank signals, inventory trends, and tariff developments for the next decisive move.

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