Why Are Copper Prices Rising in 2025?
The global copper market has experienced significant price appreciation in recent weeks, with multiple factors converging to create a bullish environment. This surge comes amid a complex interplay of macroeconomic forces and fundamental supply-demand dynamics that are reshaping the landscape for this critical industrial metal.
The Dollar Effect: Currency Weakness Boosting Commodity Prices
The US dollar has fallen to its lowest level since early 2022, creating a favorable environment for dollar-denominated commodities like copper. According to the latest data from Shanghai Metals Market (SMM), this currency weakness is providing substantial support to the rise in copper prices amid weak US dollar, with LME copper settling at $9,896/mt on June 26, 2025—up an impressive 1.74% in a single trading session.
"The dramatic weakening of the US dollar is creating a perfect storm for commodity prices, with copper being a primary beneficiary of this currency movement," notes the SMM Research Team in their June 27 market analysis.
This dollar weakness stems from several converging factors:
- Federal Reserve leadership uncertainty: Media reports indicate that Trump is considering announcing Powell's successor as early as September 2025, creating market anxiety
- Monetary policy independence concerns: Growing questions about the future autonomy of US central banking decisions
- Interest rate trajectory: Market expectations shifting toward potentially more aggressive rate cuts
- Policy stability perceptions: Declining confidence in long-term US monetary policy predictability
Supply Constraints Tightening the Market
Domestic Production Limitations
The copper market is experiencing notable supply tightness that's contributing to price increases. SMM data reveals that smelters are increasingly focusing on export opportunities, creating a ripple effect across domestic markets:
- Supply shortages reported in multiple regions, with Changzhou cited as a particularly constrained area
- Spot cargo availability continuing to diminish as semi-annual settlements approach completion
- Secondary copper raw material availability declining despite relatively stable pricing
"With smelters increasing export volumes and constrained domestic supply in Changzhou and other regions, premiums are expected to rise steadily," reports SMM's analysis team.
Inventory Movements Reflecting Market Conditions
Recent inventory data underscores the supply-side pressure affecting copper markets:
- LME copper cathode inventory decreased by 400 metric tons to 93,075 metric tons (as of June 26, 2025)
- SHFE warrant inventory increased by 2,226 metric tons to 23,696 metric tons
This divergence between international and Chinese exchange inventories highlights the complex global flows occurring as market participants respond to price signals and regional premiums.
How Are Regional Copper Markets Responding?
The impact of the dollar weakness and supply constraints is playing out differently across key copper trading hubs, with variations in premium structures and market dynamics reflecting regional supply-demand balances.
Shanghai Market Dynamics
The Shanghai copper market has shown clear signs of tightening, with premiums rising substantially:
- SMM #1 copper cathode spot premiums against the front-month 2507 contract averaged 65 yuan/mt
- This represents a significant 35 yuan/mt month-over-month increase
- Trading activity has remained relatively stable despite higher premium levels
- Physical market participants report growing difficulties securing prompt deliveries
SMM's market analysis indicates that "premiums are expected to continue rising steadily due to anticipated supply constraints," highlighting expectations for further market tightness in the coming weeks.
Guangdong Market Trends
Similar patterns are emerging in the Guangdong region, though with some distinct characteristics:
- Guangdong #1 copper cathode spot premiums against the front-month contract averaged 55 yuan/mt
- This reflects a substantial 45 yuan/mt month-over-month increase—even greater than Shanghai's premium growth
- Market psychology has shifted noticeably, with suppliers transitioning from inventory clearance strategies to price maintenance
- Trading activity has shown modest improvement compared to previous periods, suggesting sustained demand despite higher prices
The rapid premium growth in Guangdong reflects both regional supply tightness and the strategic behavior of market participants responding to evolving price signals.
Import Market Conditions
The imported copper segment presents a more nuanced picture, with different metrics showing varying trends:
- Warrant prices ranged from $30-44/mt (QP July), averaging $1/mt less month-over-month
- B/L prices stood at $50-80/mt (QP July), also averaging $1/mt less month-over-month
- EQ copper (CIF B/L) premiums were $4-14/mt (QP July), averaging $1/mt less month-over-month
- Notably, market demand for non-domestic re-export B/Ls has increased, highlighting arbitrage opportunities between markets
This complex import market structure reflects both the global nature of copper trade and the unique dynamics of China's position as the world's largest copper consumer.
What's Happening in the Secondary Copper Market?
The secondary copper sector, which processes recycled materials, is experiencing its own set of challenges and price dynamics as the broader copper market strengthens.
Raw Material Challenges
Secondary processors are facing significant procurement difficulties as supply chains tighten:
- Secondary copper raw material prices rose 100 yuan/mt month-over-month according to SMM data
- Guangdong bare bright copper prices reached 72,800-73,000 yuan/mt, up 100 yuan/mt from the previous trading day
- The price difference between copper cathode and copper scrap widened to 1,452 yuan/mt, increasing 279 yuan/mt month-over-month
- The price gap between copper cathode rod and secondary copper rod stands at 1,225 yuan/mt
These widening price differentials highlight the growing value premium placed on refined copper products as secondary raw material availability becomes constrained.
Supply Chain Disruptions
Industry participants report growing challenges throughout the secondary copper supply chain, creating a feedback loop that further tightens the market:
- Market availability of secondary copper raw materials has declined despite steady copper prices
- Decreasing sales volumes from dismantling plants and recycling stations are limiting procurement capacity
- As copper prices rise, suppliers are increasingly withholding sales in anticipation of further price appreciation
- Secondary copper rod enterprises are struggling to secure sufficient raw materials for continuous operations
- Some regions face purchase difficulties even when offering price premiums, indicating true physical shortages
"A secondary copper raw material yard manager reported decreasing sales volumes from dismantling plants and recycling stations, limiting procurement capacity," according to SMM's industry survey, highlighting the real-world impacts of these supply chain bottlenecks.
How Are Global Economic Factors Influencing Copper?
Beyond the immediate supply-demand dynamics, broader economic factors are playing a significant role in shaping copper market sentiment and price direction.
US Economic Contraction
Recent economic data from the United States reveals concerning trends for the world's largest economy:
- US real GDP contracted at an annual rate of -0.5% in Q1 2025, according to data cited by SMM
- This exceeded the forecasted -0.2% decline and reversed the 2.4% growth seen in Q4 2024
- This marks the first economic contraction in the US in three years, raising questions about the durability of economic expansion
- The downturn primarily reflected increased imports and reduced government spending
- While investment and consumer spending grew, they failed to fully offset these negative factors
This economic contraction has complex implications for copper. While slower growth typically suggests weaker demand, the concurrent dollar weakness is currently proving to be a more dominant factor in price formation.
Trade Policy Uncertainties
Potential changes in US trade policy are creating additional market uncertainty and influencing price expectations:
- The US Department of Commerce is expected to announce results of Section 232 investigations into semiconductors, pharmaceuticals, and critical minerals
- Additional tariffs on foreign products in these sectors may be implemented if imports are deemed to "threaten US security"
- The July 9 deadline for tariff suspension is rapidly approaching
- Section 232 tariffs may replace existing reciprocal tariffs per the April 2 announcement
- The White House has stated there are no plans to extend the July 9 tariff suspension
These trade policy considerations add another layer of complexity to the copper market outlook, with potential implications for international trade flows and regional price differentials.
What's the Outlook for Copper Prices?
The convergence of macroeconomic factors and supply constraints suggests continued strength in copper prices, though with several key variables to monitor.
Short-Term Price Projections
Market analysts at SMM expect copper prices to maintain recent momentum in the near term:
- The weak US dollar index is expected to provide ongoing support for all dollar-denominated commodities
- Supply tightness in multiple regions will likely maintain upward pressure on physical premiums
- Copper prices are anticipated to maintain recent highs with supported price floors
- Renewed tariff concerns may further bolster copper prices after the July 9 suspension deadline
- Chinese premium structures suggest continued strong import incentives
"Copper prices are expected to maintain highs today with supported floors," notes SMM's research team, reflecting the positive short-term outlook.
Factors to Monitor
Market participants should keep a close eye on several key indicators that could influence price direction:
- US Federal Reserve leadership transition developments, especially any official announcements regarding Powell's successor
- Changes in US monetary policy expectations, particularly regarding the pace and magnitude of interest rate adjustments
- Implementation of potential trade restrictions under Section 232 and their impact on global metals flows
- Evolution of domestic and international copper supply constraints, especially smelter export volumes
- Shifts in secondary copper raw material availability as recycling flows respond to price signals
- LME and SHFE inventory movements, which provide visible signals of physical market tightness
The complex interplay between these factors will determine whether copper's recent price strength represents a temporary spike or the beginning of a more sustained uptrend in this critical industrial metal. Those interested in copper price predictions should monitor these indicators closely.
FAQs About the Copper Market in 2025
What caused the recent spike in copper prices?
The recent spike in copper prices can be attributed to a combination of a weakening US dollar, which has fallen to its lowest level since early 2022, and significant supply constraints across multiple regions. Smelters increasing their export efforts have led to domestic copper shortages, while secondary copper raw material availability has declined despite stable pricing. LME copper settled at $9,896/mt on June 26, up 1.74%, reflecting these bullish factors. Furthermore, the global copper supply forecast remains tight, adding additional upward pressure.
How are regional copper markets performing differently?
Shanghai and Guangdong markets are showing similar trends with rising premiums (35 yuan/mt and 45 yuan/mt month-over-month increases, respectively). However, the imported copper segment presents a slightly different picture with warrant prices, B/L prices, and EQ copper premiums all averaging $1/mt less month-over-month, though demand for non-domestic re-export B/Ls has increased. These regional variations reflect differences in local supply-demand balances and trading strategies.
What challenges is the secondary copper market facing?
The secondary copper market is experiencing significant procurement difficulties with raw material prices rising 100 yuan/mt month-over-month. Industry participants report decreasing sales volumes from dismantling plants and recycling stations, suppliers withholding sales as prices rise, and secondary copper rod enterprises struggling to secure sufficient raw materials even when offering price premiums. The price difference between copper cathode and copper scrap has widened to 1,452 yuan/mt, up 279 yuan/mt month-over-month.
How might US economic and trade policies affect copper prices?
The US economy contracted at an annual rate of -0.5% in Q1 2025, exceeding forecasts and marking the first contraction in three years. Additionally, potential Section 232 tariffs on semiconductors, pharmaceuticals, and critical minerals could be implemented after July 9, 2025. These factors, combined with uncertainty about Federal Reserve leadership, are contributing to dollar weakness and supporting copper prices despite the economic slowdown. The US copper production outlook will also play a crucial role in how prices evolve.
What's the relationship between copper cathode and copper scrap prices?
The price difference between copper cathode and copper scrap has widened to 1,452 yuan/mt, representing a 279 yuan/mt month-over-month increase. Similarly, the price gap between copper cathode rod and secondary copper rod stands at 1,225 yuan/mt. These widening spreads reflect the growing challenges in the secondary copper supply chain, as recycled material becomes harder to source despite rising refined copper prices. In addition, developments in the Argentine copper system and other emerging producing regions may further influence global pricing relationships.
Further Exploration:
Readers interested in learning more about the rise in copper prices amid weak US dollar conditions can explore related educational content through the Shanghai Metal Market analysis. Additionally, for those considering copper investment insights, understanding these market dynamics is essential for making informed decisions in this volatile sector.
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