LME copper has settled around $13,850-$14,000/t entering the last week of July, up 3.7% over the past month and 9% year-on-year. The COMEX premium over LME widened to nearly $600/t as traders continue pricing in a pending Section 232 tariff on refined copper imports.
The defining event of July was the ICSG's April meeting, where the study group officially reversed its earlier forecast of a 150,000t deficit to a 96,000t surplus for 2026. For 2027 the surplus expands to 377,000t. The revision stems from slower demand growth and higher secondary output, not a collapse in consumption.
But the surplus headline conceals a more complex picture. SHFE-monitored deliverable stocks have collapsed 82% since early May, while LME inventories are down 28% over the same period, with 56% of remaining LME metal already on cancelled warrants bound for the United States. Global visible stocks exceeded 1.3Mt in March 2026, but that metal is concentrated in COMEX warehouses — effectively locked behind tariff expectations.
The Yangshan copper premium, a real-time gauge of Chinese import appetite, surged to $115/t in late July from near zero in June, and Shanghai spot premiums hit 435 yuan/t, the highest since May 2025. Chinese buyers are pulling material from overseas at a pace that contradicts the surplus narrative.
Macquarie Strategy warns that the visible inventory build — 870,000t since early 2025 — reflects US stockpiling ahead of tariffs rather than true oversupply. The bank estimates an additional 550,000t sits off-exchange in the United States, calling the current tightness outside the US 'artificial.' JP Morgan and others maintain that medium-term deficits remain the structural reality once tariff stockpiling unwinds.
China's demand picture is genuinely bifurcated. Property and traditional construction remain weak. NEV output and sales fell 8.8% and 6.9% respectively in January-February after incentive reductions. But the electrification story — grid, EVs, AI data centers — continues to underpin growth at 1.9% for Chinese demand and 1.6% globally per the ICSG.
For H2 2026, the consensus analyst poll from Reuters puts LME cash copper averaging $13,250/t in Q4, with 2027 at $13,059/t. Tacto's procurement guidance (July 19) sums up the strategy well: 'The entry window for H2 volumes is open, but only with a tariff adjustment clause.'
The bull case: SHFE stocks near zero, LME warrants draining, structural demand from electrification and AI infrastructure accelerating. A sustained deficit in concentrate supply — mine output growth trimmed to 1.6% in 2026 — means refined production can't respond quickly if demand surprises. The bear case: the ICSG surplus is real, the US inventory overhang is massive, and Chinese property demand is a structural drag. If tariff expectations shift, the COMEX premium collapses and global metal redistributes.
The base case: prices consolidate in the $13,000-$14,000 range through H2, with the ICSG surplus capping upside but physical tightness in Asia preventing a sharp correction. The Section 232 decision (recommendation on the President's desk: 15% in 2027, 30% in 2028) is the single biggest unknown.
Do not rush into long-term fixed-price contracts at current $14,000 levels. The ICSG surplus and massive US inventories argue against panic-buying full-year volumes. But avoid being structurally short: falling Asian inventories and extreme Chinese spot premiums can sustain elevated prices even if paper markets ease. Structure H2 contracts as floating LME formulas with caps and collars, and make tariff adjustment clauses non-negotiable for any contract extending into 2027. Watch SHFE stocks and the Yangshan premium as high-frequency signals — when both tighten further, it's time to layer in more coverage. Phased, staggered purchasing through Q3-Q4 is the right approach.