Citi(US:C)2025-09-04 15:08Summary of Key Points from the Copper Expert Call with SMM Industry Overview - Industry: Copper Industry in China - Company: SMM (Shanghai Metals Market) Core Insights 1. Policy Impact on Copper Production: The new policy of Regulating Investment Promotion Activities, effective from September 1, 2025, is expected to increase the tax burden on recycling copper producers, leading to a decrease in crude copper output from scrap. The full impact of the policy is yet to be observed [2][3] 2. Projected Output Decrease: SMM forecasts a month-over-month decrease of 52.5kt in China’s copper cathode output for September 2025. This includes a 14-15kt decrease attributed to scheduled maintenance, with the remainder linked to the new policy [3] 3. Recycled Copper Rod Output: The total impact of the policy on the copper supply chain is estimated to be between 50-55kt in September 2025, affecting both cathode and recycled copper rod outputs [3] 4. Demand Forecast: SMM anticipates a year-over-year increase of over 4% in copper demand for 2025, with a notable slowdown in growth during the second half of the year due to a high base effect and weak demand in the home appliance sector [4] 5. Global Copper Concentrate Supply: Global copper concentrate output is expected to rise by approximately 70kt year-over-year in 2025, with a further increase of nearly 450kt year-over-year in 2026 [5] Additional Insights 1. Smelting Capacity: Despite the increase in copper concentrate output, smelting capacity is likely to remain in surplus due to new capacity additions. The application of anti-involution measures is considered unlikely for the copper smelting sector [8] 2. Copper Tariff Effects: Current Comex copper inventory stands at around 280kt, with monthly imports between 100-120kt, which is higher than pre-tariff levels. Future tariffs on copper cathodes are anticipated to influence market dynamics [9] 3. Copper Price Outlook: SMM projects copper prices to reach approximately $9,950 per ton over the next three years, with an average price of $10,500 per ton expected in 2026, driven by a resilient US economy and anticipated Fed rate cuts [10] Conclusion The copper industry in China is facing significant changes due to new regulatory policies, which are expected to impact production and demand dynamics. The anticipated decrease in output and the evolving market conditions present both challenges and opportunities for stakeholders in the copper supply chain.