1.Downstream Consumption Weakened During the Day, Spot Premiums Edged Down Slightly

February 25:

Today, spot #1 copper cathode against the SHFE 2503 contract was quoted at a discount of 140-100 yuan/mt, with an average price at a discount of 120 yuan/mt, down 15 yuan/mt from the previous trading day. Standard-quality copper was traded at 76,820-77,010 yuan/mt, and high-quality copper at 76,840-77,040 yuan/mt. The SHFE copper 2503 contract briefly dipped to 76,930 yuan/mt during the morning session before rebounding to fluctuate around 77,070 yuan/mt. The price spread between the SHFE copper 2503 and 2504 contracts ranged from a backwardation of 110 to 150 yuan/mt.

Spot trading in the early market was sluggish, with weak downstream purchasing sentiment. At the beginning of the session, suppliers quoted mainstream standard-quality copper at a discount of 130-120 yuan/mt, and high-quality copper at a discount of 120-80 yuan/mt. Downstream buying interest was weak, and overall demand was poor as most processing enterprises opted for long-term contracts over spot orders due to the approaching month-end. During the main trading session, mainstream standard-quality copper was traded at a discount of 140-130 yuan/mt, and high-quality copper at a discount of 120-100 yuan/mt. Hydro copper was quoted at a discount of around 200 yuan/mt. By 11 a.m., spot premiums in the Shanghai region stabilized, while actual transaction prices in surrounding areas continued to decline.

Market buying interest remained subdued during the day, but it was observed that the SHFE copper 2405 contract had shifted to a backwardation structure. Suppliers, anticipating a turning point in inventory, were not in a hurry to sell. Spot premiums are expected to stabilize tomorrow.

2.Inventory Slightly Increased but Demand Rose, Copper Prices Edged Down Overnight 

February 25 News: Overnight, LME copper opened at $9,490.5/mt, initially rising to an intraday high of $9,531/mt before declining to a low of $9,474/mt. By the end of the session, the center of gravity lifted but then returned to lower levels, ultimately closing at $9,502/mt, down 0.14%. Trading volume reached 16,000 lots, and open interest stood at 291,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 77,360 yuan/mt, hitting an early high of 77,580 yuan/mt before fluctuating downward to a low of 77,160 yuan/mt. By the session's end, it remained rangebound, closing at 77,300 yuan/mt, down 0.15%. Trading volume reached 24,000 lots, and open interest stood at 173,000 lots. Macro side, Russian President Vladimir Putin stated that Russia and the US could agree on a 50% reduction in arms and that Russia plans to resume aluminum product exports to the US, with an export volume of 2 million mt. Meanwhile, market concerns over US economic growth have begun to emerge, intensifying as the deadline for Trump's tariffs on Canada and Mexico approaches next week, leading to a decline in copper prices. Fundamentally, limited import arrivals during the week, combined with increased downstream restocking amid falling copper prices, have significantly slowed the pace of social inventory buildup. As of Monday, February 24, data showed copper inventories in major regions nationwide increased by 16,000 mt from last Thursday to 374,000 mt, with total inventories up by 208,000 mt compared to pre-holiday levels. Among them, Shanghai inventories were 128,000 mt higher than pre-holiday levels, Guangdong inventories were up by 48,000 mt, and Jiangsu inventories increased by 37,000 mt. In terms of prices, copper prices are expected to continue declining today.

3.Current Status and Outlook of the Copper Enamelled Wire Industry: Seeking Balance Between Surplus and Growth

With the rapid growth of China's economy and accelerated industrialization, the market size of enamelled wire has been continuously expanding, attracting numerous enterprises to enter the industry, leading to a rapid expansion of capacity. However, the excessive expansion has resulted in a passive supply-demand imbalance. According to SMM data, by 2024, China's enamelled wire industry capacity had exceeded 3.74 million mt, while annual demand was approximately 2.4 million mt, with an annual capacity utilisation rate of only 64%.

       The surplus in capacity has intensified the industry's "cut-throat competition." In the enamelled round wire sector, the number of enterprises is large, and product homogenization is severe. To secure a share of the limited market, competition among enterprises has evolved into fierce "cut-throat competition." Enamelled wire companies have adopted strategies such as "extending payment terms" and "reducing processing fees" to exchange profits for volume to maintain production, plunging the industry into a vicious cycle of low-level competition.

       Over the past year, the enamelled wire market experienced fluctuations in orders. Affected by the sluggish real estate sector, domestic demand for traditional enamelled wire declined significantly. However, thanks to the strong performance of the end-user home appliance and auto parts industries, as well as the increase in export orders, the enamelled wire market performed better than expected. Specifically:

        Booming Home Appliance Production and Sales Boost Enamelled Wire Orders

       Home appliances are one of the main downstream application fields of enamelled wire, accounting for 30% of its consumption. In 2024, China's three major home appliances (refrigerators, washing machines, and air conditioners) continued to achieve rapid growth despite a high base from the previous year. From January to December, the cumulative YoY growth rate of refrigerator production reached 8.3%, washing machines 68.8%, and air conditioners as high as 19.5%. Exports also performed well, with washing machine export volume reaching 32.86 million units (up 14.2% YoY), refrigerator exports at 80.32 million units (up 19.7% YoY), and household air conditioner exports at 85.004 million units (up 28.3% YoY).

      The implementation of the trade-in policy for home appliances stimulated consumer purchasing enthusiasm, driving the production and sales of refrigerators, washing machines, and other appliances. Meanwhile, air conditioner manufacturers actively shifted to export markets amid weak domestic sales, resulting in better-than-expected export growth. As an indispensable raw material in air conditioner compressors, refrigerator refrigeration compressors, and washing machine motors, enamelled wire orders grew rapidly alongside the booming home appliance market. Throughout the year, the home appliance market significantly supported the demand for enamelled wire.

       Robust Automotive Industry Drives Steady Growth in Enamelled Wire Demand

       Enamelled wire is closely linked to the automotive industry, being widely used in wiper motors, motor drives, window regulators, relays, drive motors, and NEV charging piles. In recent years, with the rise of NEVs, automobile production and sales have grown rapidly. According to CAAM, in 2024, China's cumulative automobile production and sales reached 31.282 million units and 31.436 million units, up 3.7% and 4.5% YoY, respectively. Among them, NEV production and sales totaled 12.888 million units and 12.866 million units, up 34.4% and 35.5% YoY, respectively, with NEV sales accounting for 40.9% of total new car sales.

       As NEV penetration continues to rise, the demand for enamelled flat wire is also increasing. Currently, domestic demand for enamelled flat wire is performing well, with top-tier enterprises maintaining stable operating rates. However, as flat wire capacity continues to expand, market competition has intensified, leading to a significant decline in automaker tender prices and a drop in enamelled flat wire processing fees. Despite this, the robust development of the NEV industry continues to bring enormous potential and opportunities to the enamelled wire market.

       Impressive Export Performance Sets New Record

       In 2024, driven by demand boost and the "rush to export" trend, China's enamelled wire exports achieved remarkable results. Customs data shows that in 2024, China exported a total of 118,361.91 mt of copper enamelled wire, up 29.57% YoY (HS code 85441100). Among the main export destinations, Vietnam, Japan, and Thailand remained the top three, accounting for 40% of China's total copper enamelled wire exports. The record-high export volume significantly contributed to the improvement of annual operating rates.

      Currently, the enamelled wire industry is facing severe challenges. Against the backdrop of rapid industry expansion, the issue of overcapacity has become increasingly prominent, and competition among enterprises has intensified. This has directly led to a continuous decline in processing fees and a severe compression of profit margins. Additionally, the extension of order payment terms has posed significant challenges to enterprises' cash flow management. Nevertheless, despite the overall difficulties in the enamelled wire industry, opportunities still exist. SMM believes that although the growth rate of home appliance industry orders may slow this year, the incremental growth remains promising. The auto parts industry also has a positive outlook. Currently, the automotive industry is rapidly advancing toward new energy and intelligentization, bringing vast opportunities to the enamelled wire market. In the near future, it will become a core driving force for the development of the enamelled wire industry. Furthermore, high-end fields such as intelligent robotics also present a promising development direction for the enamelled wire industry. The precise motors and electronic components inside intelligent robots demand high performance and quality from enamelled wire, providing opportunities for enamelled wire enterprises to explore high-end markets.

4.The Inventory Buildup Has Significantly Slowed Down, and the Spot Market Awaits Destocking Signals

News on February 21:

Today, #1 copper cathode spot prices against the SHFE 2503 contract were quoted at a discount of 130-80 yuan/mt, with an average price at a discount of 105 yuan/mt, up 5 yuan/mt from the previous trading day. Standard-quality copper was traded at 76,980-77,210 yuan/mt, and high-quality copper at 76,990-77,250 yuan/mt. The SHFE copper 2503 contract opened lower in the morning and then moved higher. It initially tested 77,060 yuan/mt before fluctuating upward, peaking at 77,350 yuan/mt during the session. Before the end of the morning session, it fluctuated around 77,250 yuan/mt. The price spread between the SHFE copper 2503 and 2504 contracts fluctuated at C150-C170 yuan/mt.

Spot premiums rose slightly in the early session, remaining generally consistent with last Friday. At the beginning of the session, suppliers quoted mainstream standard-quality copper at a discount of 120-100 yuan/mt, and high-quality copper at a discount of 110-80 yuan/mt. Market sentiment was similar to last Friday. During the main trading session, mainstream standard-quality copper was quoted at a discount of 130-120 yuan/mt, with transactions concluded, while high-quality copper was quoted at a discount of 120-90 yuan/mt, with transactions concluded. Hydro copper was traded in small volumes at a discount of around 200 yuan/mt. By 11 a.m., mainstream standard-quality copper was quoted at a discount of 140-120 yuan/mt, with limited transactions, and high-quality copper at a discount of 120-100 yuan/mt, with transactions concluded.

Limited import arrivals during the week and a significant slowdown in social inventory buildup have been observed. The market is expected to see a recovery in downstream domestic consumption in March, stabilizing spot premiums. Spot premiums are expected to be more likely to rise than fall tomorrow.

5.Affected by Macro Expectations, LME Copper and SHFE Copper Showed Different Performances Last Friday Night

February 24 News: Last Friday evening, LME copper opened at $9,536.5/mt, fluctuated considerably from the beginning to the middle of the session, peaked at $9,567.5/mt near the close, then pulled back slightly to a low of $9,497/mt, and finally closed at $9,515.5/mt, down 0.44%. Trading volume reached 18,900 lots, and open interest stood at 292,000 lots. Last Friday evening, the most-traded SHFE copper 2504 contract opened at 77,350 yuan/mt, initially peaked at 77,700 yuan/mt, fluctuated downward to a low of 77,400 yuan/mt during the session, then rebounded to form a "V-shape," peaked at 77,680 yuan/mt near the close, and finally pulled back slightly to close at 77,630 yuan/mt, up 0.12%. Trading volume reached 20,000 lots, and open interest stood at 172,000 lots. Macro side, as investors consolidated positions ahead of the weekend, anticipating more inflation data (such as PCE) this week and closely monitoring tariff-related headlines, the US dollar strengthened, weighing on LME copper. Additionally, if relations between Trump, Zelensky, and the EU further deteriorate or new tariff policies emerge, the US dollar may continue to rise, further pressuring copper prices. Fundamentally, copper prices fluctuated, with downstream procurement sentiment remaining moderate, primarily maintaining just-in-time procurement. Affected by tariffs, the export window opened, and smelters began planning exports, reducing the actual tradable copper volume in the market, which may somewhat slow the domestic inventory buildup process. Premiums are expected to rebound this week. In terms of prices, with tariff sentiment fluctuating and domestic policy expectations remaining positive, copper prices are expected to fluctuate at highs today.