Is weak U.S. imports and China's data vacuum during the Spring Festival a short-term headwind for copper prices?

The steady rise in copper prices, supported by macroeconomic optimism, is now facing a test at the micro level. Although expectations for rate cuts, tight supply, and emerging demand themes continue to provide support, weakened U.S. import momentum and a pre-Spring Festival demand vacuum in China are applying short-term pressure to the market.

According to Wind Chasing Trading Desk, Morgan Stanley’s Amy Gower team released a research report on the 22nd, stating that the narrowing of the COMEX-LME price spread is changing copper flows. After a wide arbitrage window in Q4 2025, U.S. refined copper imports surged in December last year and early January this year, but as market expectations for Section 232 copper tariffs in 2027 cooled, the narrowing price differential erased the economic incentive for further imports. This week, LME warehouses in the U.S. even saw the first copper inflow in nearly a year, following a brief spot premium in LME prices.

Morgan Stanley notes that in December last year, China's apparent copper demand was flat, refined copper exports remained strong, and inventories accumulated counter-seasonally. As the Lunar New Year approaches in mid-February, the market enters a data vacuum period and further information on demand conditions will only be available in mid-March.

Nevertheless, extreme supply constraints will provide underlying support for copper prices. Morgan Stanley forecasts copper mine supply growth of only 0.2% in 2026, with a market deficit of around 600,000 tons. Chile’s Mantoverde mine under Capstone halted production due to strikes (annual capacity 106,000 tons), and several supply disruptions in 2025 will extend into this year. Analysts believe that tight supply and a strong macro backdrop will provide good price support, but short-term volatility is inevitable. At press time, London copper futures rose 0.57% to $12,913.

U.S. Import Momentum Shifts

The copper import boom in the U.S. is cooling off. Morgan Stanley data shows that even though the volume of U.S. refined copper arrivals surged in December last year and early January this year, the narrowing of the COMEX-LME price spread has eliminated the financial incentive for continued large-scale imports. This change comes from a reevaluation of expectations for Section 232 tariffs on refined copper, as no tariffs were imposed according to the key mineral Section 232 survey results published on January 14.

More significant is the change in copper flows. This week, LME warehouses in the U.S. recorded their first copper inflow in nearly a year, as LME spot prices briefly traded at a premium. This is putting pressure on LME prices and the time spread, and LME inventories in Asia have started to accumulate.

Morgan Stanley believes that the likelihood of copper being exported from the U.S. is extremely low, but imports are expected to slow. Decisions on whether to impose tariffs will be key to the outlook for the second half of 2026 and 2027. For copper prices, the greatest downside risk is the U.S. completely ruling out tariffs on refined copper, which would allow accumulated inventories to flow to a wider market.

According to bill of lading data, U.S. inventory levels are currently very high, mainly concentrated on the COMEX exchange. Implied stockpiles outside COMEX indicate a large volume of copper has flowed into the U.S. during the previous import boom.

China's Demand Faces Seasonal Test

In December, China’s apparent copper demand continued to show negative growth, refined copper exports remained strong, and inventories rose counter-seasonally. Additionally, the data vacuum ahead of the Spring Festival has added to market uncertainty. As the Lunar New Year approaches in mid-February, the market will be unable to get limited data on China’s demand situation until mid-March. The Yangshan copper premium has dropped to -$22/ton, its lowest since mid-2024.

Meanwhile, China's refined copper output remains strong. Refined copper production in China is projected to grow by 10% in 2025, hitting a new high. Despite a severely tight global copper concentrate market and negative treatment charges (TC), China has added a significant amount of smelting and refining capacity. China successfully increased copper concentrate imports by 8%, with Chile and Peru as the largest suppliers, and Mongolia also contributing more.

Scrap copper is also supporting refined copper growth. China’s scrap copper imports are projected to grow 4% in 2025, reaching a historic high in December, indicating that smelters may be using more scrap copper to boost refined output. Asia is China’s largest scrap copper supply region, while flows from the U.S. are now near zero. With strong domestic refining output and imports declining as a proportion of the supply mix, China has even started exporting refined copper in recent months. If U.S. demand slows, we could see further inventory buildup.

Mine Supply Extremely Tight

Tightness on the supply side will provide key support for copper prices. Morgan Stanley forecasts copper mine supply growth of just 0.2% in 2026, as many mine supply disruptions from 2025 extend into 2026. Chile’s Mantoverde mine under Capstone has stopped production due to strikes (capacity 106,000 tons/year), Lundin Mining has also slightly lowered its 2026 guidance. This may limit refined copper supply growth (projected at 0.6% by Morgan Stanley), and even with more scrap copper usage, the overall market will remain tight.

However, some recovery space exists in the second half of 2026 and in 2027. Freeport McMoRan said parts of its Grasberg mine are set for phased reopening from Q2 2026, Ivanhoe’s Kamoa Kakula project has certain recovery potential, and First Quantum’s Cobre Panama mine could also restart.

According to Wood Mackenzie data, copper mine disruptions in 2025 could exceed 6% of supply, with cumulative disruptions over 1.4 million tons. Historical data show copper mine supply growth rate was volatile between 2015–2024, with growth rates in 2025 and 2026 notably at historical lows.

Market Outlook

Morgan Stanley projects a roughly 600,000-ton copper market deficit in 2026, as limited mine supply growth (expected at 0.2%) cannot match strong demand growth (expected at 1.8%), the latter driven by new factors such as data centers and energy storage systems.

The macro backdrop continues to support metals prices. Additional rate cuts will support non-yielding assets and key end-use industries, and the firm's FX strategists see some room for dollar weakening. Growing interest in supply security and new demand themes such as data centers are driving demand for physical assets. Copper open interest has steadily climbed.

The firm started the year with a positive view on metals including copper, but prices have now exceeded its Q2 forecast of $12,200/ton. Analysts believe supply tightness and a strong macro backdrop will provide good price support, but given uncertainties around U.S. import trends, short-term volatility is likely.

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