The Zhitong Finance App learned that copper prices have shown fatigue after soaring to an all-time high, but Morgan Stanley believes that the recent weakening is only a temporary adjustment, and sees the pullback as a potential buying opportunity.
The bank pointed out that strong import demand from the US and China has tightened the copper market supply and demand pattern, driving the London Metal Exchange (LME) copper inventory downward, and at the same time driving the spot price spread to the highest level since 2021.
Morgan Stanley said that high copper prices have begun to curb consumer appetite in key markets. With the deep rise in LME's spot water essentially closing the spot import arbitrage window, the pace of US copper imports has slowed; while China's import arbitrage space has also shifted towards exports. According to the data, China's implied imports of refined copper fell 12.5% year on year in July, compared to a 3.8% increase in the second quarter; at the same time, Yangshan copper's spot rise also declined.
The bank also pointed out that the reconstruction of LME inventory is another sign that market margins are loosening. In the three trading days up to August 19, LME's registered warehouse receipt inventory increased by 64,000 tons, making it the largest weekly inflow since 2020. The main reason was that traders used the price difference structure of high contracts in recent months and monthly contract fees to carry out arbitrage operations.
Despite this, Morgan Stanley does not expect China's weak demand to last long, and believes that once copper prices stabilize or recover, procurement activities will get back on track. The bank sees the US copper tariff decision as a key catalytic factor in the second half of the year, and its impact on prices will be highly dependent on whether the tariffs are postponed, implemented immediately, excluded, or postponed.
Morgan Stanley maintained its forecast for the LME copper price target of 14,250 US dollars per ton in the fourth quarter, but at the same time pointed out that if the macro environment improves or tariffs are delayed to trigger a new wave of rushing to the US, copper prices may break this level.
However, the bank's outlook for 2027 tends to be cautious. At that time, US import demand may weaken, compounded by the release of new mine supply, and the copper market supply and demand pattern is expected to become more relaxed.