Morgan Stanley(US:MS) Hua Er Jie Jian Wen·2026-01-23 07:34Core Viewpoint - Copper prices are facing short-term pressure despite macroeconomic support due to weakening U.S. import momentum and a demand vacuum ahead of the Chinese New Year [1][5]. Group 1: U.S. Import Dynamics - The surge in U.S. refined copper imports observed in December and early January has cooled down as the narrowing COMEX-LME price spread has eliminated financial incentives for continued large-scale imports [5][6]. - The market's adjustment to the expectations regarding Section 232 tariffs on refined copper has contributed to this change, as the anticipated tariffs were not implemented following the January 14 investigation results [5]. - Recent data indicates a significant inflow of copper into LME warehouses in the U.S., marking the first occurrence in nearly a year, which is suppressing LME prices and cross-period spreads [5][6]. Group 2: Chinese Demand Trends - China's apparent copper demand showed negative growth in December, while refined copper exports remained strong, leading to a seasonal increase in inventory [7]. - The upcoming data vacuum due to the Lunar New Year will add uncertainty to market conditions, with limited information on demand until mid-March [7]. - Despite global supply constraints, China's refined copper production is expected to grow by 10% in 2025, reaching a record high, supported by increased imports of copper concentrate and scrap [7]. Group 3: Supply Constraints - The supply side is extremely constrained, with Morgan Stanley projecting only a 0.2% growth in copper mine supply for 2026, resulting in an estimated market deficit of around 600,000 tons [2][9]. - Significant supply disruptions, such as the strike at Capstone's Mantoverde mine, are expected to extend into 2026, limiting refined copper supply growth [2][9]. - Historical data indicates that copper mine supply growth rates have been volatile, with 2025 and 2026 expected to be at historical lows [9]. Group 4: Market Outlook - Morgan Stanley anticipates a market deficit of approximately 600,000 tons in 2026 due to limited mine supply growth (0.2%) not keeping pace with strong demand growth (1.8%) driven by new factors like data centers and energy storage systems [10]. - The macroeconomic backdrop remains supportive of metal prices, with expectations of further interest rate cuts bolstering demand for non-yielding assets [10]. - Despite a positive outlook for metals, including copper, prices have exceeded initial forecasts, and short-term volatility may arise due to uncertainties in U.S. import trends [10].