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Investing.com -- Morgan Stanley said recent softness in copper prices should prove temporary, despite signs of demand pressure emerging in key markets.
After rallying to around $10,200 a tonne, copper on the London Metal Exchange has fallen back below $10,000. According to Morgan Stanley, “as copper has risen, China’s copper arb has turned negative, suggesting a degree of price sensitivity, while the physical premium has stopped rising.” In the United States, imports have also “normalised towards ~15kt/week, down from 50-60kt/week, with the first delivery into a US LME warehouse since Dec 2023.”
The bank acknowledged that stronger-than-expected conditions had overtaken its earlier cautious stance. “Copper has been stronger than we expected,” Morgan Stanley said, citing resilient U.S. imports and rising Chinese physical premiums through August, even as prices climbed.
However, the analysts noted that “physical markers are now also suggesting some weakness,” with the Yangshan premium rolling over and aluminium and zinc arbitrages in China also turning increasingly negative.
On the supply side, disruptions are intensifying. Morgan Stanley highlighted that Wood Mackenzie estimated 880,000 tonnes of supply had already been affected this year, equal to 3.7% of global production, “even before Freeport temporarily halted operations at Grasberg with the mine still only operating at 30%.”
Looking ahead, the bank expects “some modest price downside into year-end,” but emphasised that “if the current macro backdrop stays supportive, pullbacks are likely to offer buying opportunities with the 2026 balance still looking tight.”
Morgan Stanley added that it will closely track Chinese demand signals, with August end-use data due within the next 10 days.