The surge in copper prices from August through early September was fueled by tightening mine supply and tariff-related demand pull from the United States, propelling LME copper to record highs while SHFE copper neared its late-January peak. However, a report suggesting potential delays in US copper tariffs triggered a sharp pullback, though prices subsequently regained strength, with an overall upward bias remaining intact.

On the macro front, the Fed's 25-basis-point rate hike in September marked the first since July 2023, with the latest dot plot showing a median federal funds rate projection of 4.1% by end-2026, up from 3.8% in June. Chair Warsh reiterated that inflation remains "too high and too persistent," expressing doubt about its return to target, consistent with his prior remarks at the global central bank meeting. The overall tone was neutral-to-hawkish, though the market had largely priced in the hike beforehand, leaving limited room for further near-term escalation. Attention now shifts to long-end Treasury volatility, as a renewed climb in yields could reignite market anxiety.

Global copper mine supply is increasingly reflecting tightness, with ICSG data showing first-half production at 11.341 million tonnes, down 1.1% year-on-year, led by declines in Chile and Indonesia. Chile's output rose only marginally in June but reversed to a 9.4% drop in July to 403,400 tonnes, signaling a likely lackluster full-year performance. Peru, meanwhile, saw July production rise 3.7% to 236,500 tonnes, with cumulative January-July output up 2.2%. The supply squeeze persists, pushing treatment charges deeper into negative territory, with spot import TC falling to around -$220 per dry tonne, and smelters growing increasingly reluctant to accept low-priced material.

China's August copper ore imports reached 2.508 million tonnes, up 5.4% month-on-month but down 9.1% year-on-year, with cumulative eight-month imports declining 2.8%. Major port inventories stood at 624,000 tonnes as of last week, a relatively moderate level. On the refined copper front, ICSG data indicates first-half global production grew just 2.4% year-on-year, a marked slowdown from prior months, as combined growth in China and the DRC of 5.7% was partially offset by a 1.9% decline elsewhere, including a 12% drop in Chile. Vedanta's Zambian smelter has resumed operations after over three months of maintenance.

Domestically, August refined copper output was 1.279 million tonnes, marginally lower than July and down 1.2% year-on-year, with cumulative eight-month output up 4% but at a slowing pace. From September onward, tightness in concentrate and scrap-derived anode supply is unlikely to ease, and with by-product sulfuric acid prices slipping, smelters remain below breakeven. Major smelter maintenance schedules suggest significant output reductions in September and October. China's August refined copper imports totaled 250,000 tonnes, down 10.5% month-on-month and 18.6% year-on-year.

Spot premiums have surged as inventories deplete. Since late August, social inventories of electrolytic copper have drawn down rapidly, with SMM data showing a drop to 74,800 tonnes this week, while SHFE inventories fell from an August peak of 89,000 tonnes to 56,000 tonnes, with warrants at 22,000 tonnes near the low end. Tight spot supply has pushed cash premiums above 1,000 yuan per tonne since the contract rollover on September 22, heightening short-covering risks. On September 10, news that the White House had not yet decided on refined copper tariffs cooled speculative tariff positioning and contributed to the price correction, though this impact is waning. With the end of September as the expected decision deadline, a smooth implementation with tariffs set for early next year would sustain the US demand pull, supporting prices; conversely, further delays could see inventory flow back to LME, pressuring prices. The COMEX-LME spread remains around $300, still offering arbitrage opportunities. Since September, LME stocks have edged higher with 0-3 backwardation near $50, while COMEX inventories hover near an elevated 768,000 tonnes with registered warrants at 476,000 tonnes, indicating the US pull is far from over.

Demand has shown tentative improvement. The sharp rally before early September suppressed consumption, with buyers sticking to essential needs; mid-month corrections prompted active price-fixing and restocking, with new orders expanding notably and pre-holiday build plans emerging. Grid investment completions through July grew only 0.75% year-on-year, while power source investment fell 4.7%. August air conditioner output was 14.952 million units, down 9.2% year-on-year, though exports rose; September industry forecasts show narrowing declines in domestic AC production plans. Auto production and sales in August fell 4.7% and 5.1% year-on-year respectively, with NEV growth also slowing to 18.9% and 17.8%.

Overall, the Fed's September rate hike is now behind us, though long-end yield volatility and geopolitical tensions remain as dual risks. On the supply-demand front, mine supply tightness continues with TC dipping to -$220, reinforcing smelter resistance. With raw material shortages and margin pressure, output cuts are likely to materialize over the next two months. Domestic refined copper stocks are falling, spot premiums are stretched, and short-covering risks are intensifying; LME inventories are modestly rising, and attention is focused on month-end tariff policy signals. Demand faces headwinds from renewed price strength and uncertain peak-season recovery. On balance, supply-side factors dominate, keeping copper prices tilted higher, though high volatility and risk management remain critical at these elevated levels. This content is for reference only.