I. Macroeconomic Overview
Global:
United States: The US July S&P Global Manufacturing PMI came in at 49, up from 48.4 in June and beating expectations of 46.4. The Services PMI stood at 52.4, below the expected 54. The US Department of Commerce reported on Thursday that the initial estimate for the second-quarter GDP annualized growth rate was 2.4%, up from 2.0% in Q1. The faster-than-expected economic growth was driven by resilient labor market conditions supporting consumer spending, alongside increased business investment in equipment and factory construction, potentially averting the widely feared recession.
Eurozone: The Eurozone's preliminary July Manufacturing PMI dropped to 42.7, hitting its lowest level since June 2020. The preliminary Composite PMI fell to 48.9, an 8-month low, while the Services PMI dipped to 51.1, a 6-month low. In Germany, the preliminary July Manufacturing PMI slid to 38.8, a new low since July 2020. The Composite PMI came in at 48.3 (expected 50.3, previous 50.6), and the Services PMI was at 52 (expected 53.1, previous 54.1). In the UK, the July Composite PMI was 50.7 (expected 52.4, previous 52.8); the Manufacturing PMI was 45 (expected 46.1, previous 46.5); and the Services PMI fell to 51.5 (expected 53, previous 53.7), marking its lowest level since January 2023.
Japan: The realized volatility of the Japanese yen has surged to its highest level since mid-January, signaling uncertainty regarding the Bank of Japan's (BOJ) yield curve control (YCC) mechanism. This marks the first major policy shift under BOJ Governor Kazuo Ueda since he took office this year. The new stance allows the BOJ to manage the yield curve more flexibly, indicating a willingness to tolerate yields slightly above the previous target range. The rise in realized volatility reflects investor uncertainty, reminiscent of the market's resistance in mid-January to the BOJ's commitment to maintaining its YCC policy unchanged.
Domestic (China):
Ministry of Finance: In the first half of the year, land and real estate-related taxes showed mixed results. Deed tax reached 312.1 billion yuan, up 5.1% YoY; property tax totaled 194.6 billion yuan, up 3.9% YoY; land value-added tax was 321.3 billion yuan, down 18.2% YoY; cultivated land occupation tax stood at 68.5 billion yuan, down 20.4% YoY; and urban land use tax amounted to 116.9 billion yuan, down 4.9% YoY.
Inflation & Liquidity: China's factory-gate prices (PPI) fell 5.4% YoY in June, marking the fastest decline in seven and a half years. June CPI remained flat YoY and fell 0.2% MoM, indicating lingering deflationary pressures. Meanwhile, PPI dropped 5.4% YoY and 0.8% MoM. Data released by the People's Bank of China (PBOC) on Tuesday showed that new yuan loans in June surged to 3.05 trillion yuan, significantly exceeding the surveyed median of 2.337 trillion yuan. Total social financing (TSF) increased by 4.22 trillion yuan in June, also far surpassing the previously surveyed median of 3 trillion yuan.
Auto Market: According to preliminary statistics from the China Passenger Car Association (CPCA), retail sales of new energy vehicles (NEVs) reached 638,000 units from June 1-30, up 19% YoY and 10% MoM. Year-to-date NEV retail sales totaled 3.059 million units, up 36% YoY. Wholesale NEV volumes from domestic passenger car manufacturers hit 744,000 units in June, up 30% YoY and 10% MoM. Year-to-date wholesale volumes reached 3.527 million units, up 43% YoY.
II. Market Review
In July, domestic copper prices followed a "W-shaped" trajectory, experiencing mixed gains and losses, peaking before retreating, and eventually settling into range-bound consolidation. Using the Changjiang spot 1# copper as a benchmark, the average price at the beginning of the month (July 3) was 69,320 yuan/ton. By July 28, the average price had fallen to 69,040 yuan/ton, a decrease of 280 yuan, or roughly 0.4%.
From a macro perspective, recent US economic data beat expectations. The Federal Reserve raised interest rates as anticipated and explicitly signaled that rate cuts are unlikely this year. Markets now anticipate a possible rate hike in September, which dampened expectations for dovish monetary policy, thereby supporting the US dollar and capping copper's upside.
Fundamentally, although July is traditionally a low-consumption season and end-market demand was not robust, it still demonstrated resilience. Electrolytic copper supplies tightened in late July. Despite high copper futures prices, most enterprises were largely unaffected due to hedging activities, focusing instead on spot premiums and discounts. Some downstream companies reported decent orders; the low spot premiums allowed processing firms to absorb the relatively high futures prices. Additionally, certain smelters accepted a "delivery first, pricing later" model to retain customers, which somewhat boosted electrolytic copper sales. Furthermore, some downstream firms actively purchased copper in late July to secure monthly bills, meaning high copper prices did not drastically curtail overall demand.
Overall, the primary driver of the copper price rebound was the recovery in macroeconomic expectations. Copper prices are likely to face upward bias in early-to-mid August, pending validation from upcoming US CPI, employment data, and Chinese real estate figures. On the industrial side, persistent overseas supply constraints and the failure of visible inventories to rebound have provided strong underlying support for copper prices.
III. Scrap Copper Market
Scrap copper supply is relatively looser this year compared to last year, with an estimated surplus of 400,000 to 500,000 tons. This excess is primarily flowing into the smelting sector, with scrap-derived anode copper supply expected to increase by over 300,000 tons this year. Structurally, due to favorable anode copper processing fees in the second half of last year, many companies previously producing scrap copper rods switched to anode copper production, significantly boosting anode supply. However, the incremental flow of scrap copper to downstream sectors remains limited, mainly due to poor real estate orders.
As prices rebounded above 65,000 yuan/ton in June and July, scrap copper supplies re-entered the market, and the premium of refined copper over scrap returned to normal levels. In July, the refined-scrap spread ranged between 1,500 and 2,000 yuan/ton, exceeding the rational spread level. Nevertheless, demand for scrap copper remains exceptionally strong. Numerous smelters (including Jinchuan, Dongying Fangyuan, Chifeng Jinfeng, and Daye) are undergoing concentrated maintenance. Additionally, Baiyin Nonferrous has delayed its furnace commissioning to next year and needs to procure anode copper as a substitute, driving up market demand for anode copper. Consequently, the scrap copper market is in a state of oversupply shortage, with crude copper processing fees remaining at a low of 800–1,000 yuan/ton.
IV. Inventory
Domestic and international copper inventories have diverged. Shanghai Futures Exchange (SHFE) copper inventories saw another sharp decline of 21.32% to 61,300 tons, while LME copper inventories rebounded to 64,400 tons. Domestic social inventories shifted to destocking after three consecutive weeks of accumulation. As of July 28, SMM domestic electrolytic copper social inventories stood at 99,200 tons, and bonded zone inventories were at 59,100 tons. LME and COMEX copper inventories edged slightly higher, reaching 64,400 tons and 45,300 tons, respectively.
Overall, global visible inventories remain at a low level of 263,800 tons. Although consumption shows resilience, end-market buyers remain hesitant about high prices during the traditional off-season. Facing increasing electrolytic copper supplies, the market's absorption capacity will be tested, posing destocking pressures in August.
V. Industry News
Peru: The Ministry of Energy and Mines reported that the country's copper production in May surged nearly 35% YoY to 234,781 tons, driven by output increases from miners Cerro Verde, Antamina, and Southern Copper. The ministry added, "The significant increase helps Peru maintain its status as a major global copper producer." Peru has stepped up production efforts after reports in May suggested the Democratic Republic of Congo might surpass it to become the world's second-largest copper producer in the coming years, closing in on top producer Chile.
Zambia: Foreign media reported on July 20 that Zambia's copper production this year will drop by over 10% from last year, hitting a 14-year low. Copper accounts for over 70% of Zambia's export revenue. A report by the Zambian Ministry of Finance and National Planning this week projected this year's copper output at 682,431 tons, the lowest since 2009. This marks the third consecutive year of decline since production peaked in 2020. The Zambian government aims to raise annual copper production to 3 million tons by 2031, but this target faces significant headwinds.
LME Policy: In a statement, the London Metal Exchange (LME) announced that, effective the 24th, it is lowering the daily price limits for direct aluminum and copper contracts across all its trading venues from the current 15% to 12%. Following the events of March 2022—when nickel prices doubled within hours—price limits were made a permanent tool for aluminum and copper trading, the LME's most active metals.
Rio Tinto: Dominic Barton, Chairman of mining giant Rio Tinto, told Bloomberg Television that the company plans to increase investments in copper, lithium, and nickel to meet global energy transition demands as demand surges. Barton emphasized, "The shortage of copper supply is very real; it is no laughing matter."
MMG Limited: In a July 13 announcement, MMG Limited stated that deep drilling below the current Ferrobamba pit has successfully defined depth extensions and the continuity of skarn and porphyry copper mineralization beneath the 2022 ore reserve pit design. Based on existing ore body data, the Rosebery ore body continues to extend north and south, indicating further development potential within the mining lease.
Chile Tax Hike: Foreign media reported on July 17 that starting in 2024, Chile will implement a law raising mining royalties. At that time, the royalty rate will increase from the current 5–14% of operating profit to 8–26%. Profitable miners will also be subject to a 1% ad valorem tax based on sales. Consequently, copper mining companies are adopting measures such as reducing energy costs to invest in the metal mines required for the renewable energy revolution.
Copper Cable Applications: In the downstream applications of copper, particularly within the renewable energy and electrical infrastructure sectors, the demand for specialized copper-based wiring continues to expand. High-performance cables such as Silicone Braided Wire and Silicone Double Insulated Wire are increasingly utilized in high-temperature environments where superior mechanical protection and dielectric strength are required. Additionally, Silicone Parallel Wire is widely employed in electronic assemblies and lighting fixtures, offering flexible, space-efficient routing and reliable insulation, further driving the structural demand for refined copper in advanced manufacturing.
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