JPMorgan temporarily suspends bullish copper outlook: inventory surges in China and the US pose risk of price correction before the Spring Festival.

In the latest edition of "Metals Weekly" released on January 23, the JPMorgan commodities research team—led by Gregory Shearer—gave an unoptimistic assessment: Copper prices remain high, but the fundamentals supporting them are visibly weakening.

According to Chase Wind Trading Desk, the research report makes it clear from the outset that since the beginning of the year, copper prices have managed to stay at around $13,000/ton mainly due to macro funds and sentiment, rather than an improvement in spot supply and demand. As inventories in both China and overseas markets are rising simultaneously, this state of "prices running ahead of fundamentals" is becoming increasingly difficult to sustain.

China’s Refined Copper Output Hits Record High, Inventories Surge Counter-Seasonally

The research report focused heavily on China.

On the supply side, the situation is not tight. In December 2024, China’s refined copper output was about 1.18 million tons, up 7.5% year on year, and the recovery in scrap copper imports provided smelters with extra materials. But the problem lies downstream.

The report describes not a "cliff-like drop," but a more subtle and troublesome situation:

Weak downstream orders
Purchasing behavior has clearly shifted to "on-demand as the main mode"
The operating rate of copper cathode rod plants fell below 50%

The result is a counter-seasonal change in inventories. Since the end of November, China's copper inventory has increased by more than 118,000 tons, currently around 300,000 tons—more than 200,000 tons higher than the same period last year, and also significantly higher than the five-year average.

It’s worth noting that this inventory accumulation did not occur amid a surge in imports. On the contrary, in December, China's refined copper net imports dropped about 50% year-on-year, while exports remained high. Based on this, the report judges that the rise in inventories mainly reflects domestic procurement being actively postponed due to high prices.

Before and After the Spring Festival: “Distorted” Data, Only Inventory is Telling

The report is quite cautious about the outlook for the next month or so.

The Spring Festival falls on February 17, meaning that Chinese macro and industry data will enter a "semi-blind" phase. JPMorgan specifically notes that it is hard to get a “clean” demand reading before and after the festival, so the market can only indirectly judge through inventory changes.

The problem is, heading into the Spring Festival cycle this year, inventories are already high. Historically, copper inventories usually peak 5–7 weeks after the festival, with an average seasonal accumulation of about 250,000 tons over the past five years. If this pace repeats, China’s copper inventory may reach over 500,000 tons in mid-to-late March.

This means China may enter the traditional second-quarter peak season with a relatively thick “cushion” of inventory.

According to Wall Street Insights, Morgan Stanley also said in a report on the 22nd that China’s refined copper exports remained strong in December and inventories built up counter-seasonally. The pre-Spring Festival data vacuum increases market uncertainty. With the Lunar New Year coming in mid-February, the market won't get limited data about China’s demand until mid-March.

Overseas: The LME Curve Has Already “Cast a Dissenting Vote”

Signals outside China are also weak.

The report notes that the COMEX/LME arbitrage structure flipped at the front end, causing copper to flow back into US LME warehouses—US LME inventory increased by over 10,000 tons in just a week; meanwhile, Asian warehouses saw nearly 20,000 tons delivered.

Driven by the inventory increase, the LME copper price curve quickly shifted from deep spot premium to discount:

Cash-three month spread
From a near $100/ton backwardation
To a contango of around $75/ton

This is a classic signal that "fundamentals are speaking."

The More Aggressive Bull Story Has Been Put on Pause

JPMorgan has not completely dismissed the long-term bull case.

The report still believes that if the US eventually implements phased tariffs on refined copper imports, COMEX/LME spreads could once again see violent divergence, even sparking a new round of inventory drain and price surge. But they also stress that this story cannot be told at least before and after the Spring Festival—because ultimately, it requires China to again become “the pulling end.”

Before that, the team’s assessment is:

Copper prices face near-term downside risk driven by fundamentals
But around $12,000/ton, may still find some temporary support

Not Only Copper: Aluminum and Zinc will Also Spend the Holiday in a “High Inventory” State

Finally, the report broadens the focus to aluminum and zinc—the conclusion is unsurprising.

For aluminum, China’s inventory has increased about 165,000 tons in a month, now about 740,000 tons, up 250,000 tons year-on-year; zinc inventory is about 110,000 tons, roughly double last year’s. Both show price sensitivity, weak demand, and early inventory build-up.

JPMorgan's implied judgment is that if inventory drawdown after the Spring Festival is slower than the historical average, the market may need to reconsider the assumption that “demand is only postponed.”

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