At the Jackson Hole Global Central Banking Symposium on August 22, Federal Reserve Chair Jerome Powell struck a dovish tone, noting that while near-term inflation risks remain tilted upward, labor market risks are skewed downward. He emphasized that policy adjustments may be needed given the evolving balance of risks, with markets now pricing in an 85.2% probability of a Fed rate cut at the September FOMC meeting.
Powell underscored mounting labor market concerns. Nonfarm payroll growth has slowed significantly compared with 2024, while the unemployment rate, at 4.2% in July, remains relatively low due to both labor supply and demand weakening in tandem. With immigration slowing, U.S. labor force growth has decelerated, amplifying downside risks to employment. Should layoffs increase, the unemployment rate could rise more steeply.
On inflation, higher tariffs imposed under U.S. “reciprocal trade” measures have begun lifting goods prices. However, shelter inflation continues to ease, and non-housing services inflation is approaching the 2% target. With interest rates still elevated, Powell judged that the risk of persistent inflationary pressures remains limited.
If the Fed cuts rates as expected, it would likely provide short-term support to major asset classes and commodities.
Copper Supply–Demand Dynamics
On the supply side, global copper concentrate output remains tight. In Q2, production from 15 major mining companies rose just 0.9% year-on-year, with Freeport, Anglo American, Teck Resources, and First Quantum all reporting declines. Glencore and Teck have lowered annual guidance, while Chile’s production has weakened due to reduced output at Escondida and disruptions at Codelco’s El Teniente mine, potentially cutting 30,000 tonnes. The decline in spot treatment charges (TCs) further reflects supply tightness.
In scrap, China’s removal of preferential local incentives for recycled copper projects is raising costs for producers. Scrap rod makers face roughly 3% higher costs, with operating rates falling, which reduces substitution for refined copper and indirectly supports demand for primary copper.
On the demand side, surveys show weaker operating rates at domestic copper fabricators in July, with softness expected to continue into August. Real estate and appliances remain sluggish, while solar and wind installations have slowed after the “531” rush. However, with the traditional September–October peak season approaching and reduced scrap substitution, refined copper consumption retains resilience, supporting prices.
Tariff Impact on Flows
Earlier this year, expectations of U.S. tariffs spurred heavy refined copper imports, tightening supply elsewhere while boosting U.S. inventories. With tariffs now in effect as of August 1—excluding refined copper—import volumes are expected to normalize. Based on prior averages, this could release an additional 120,000 tonnes of supply per month into non-U.S. markets, easing shortages and raising pressure on China’s import balance.
Outlook
Overall, Powell’s dovish message has reinforced expectations for a September rate cut, which, alongside tight concentrate supply and the seasonal demand pickup, underpins copper prices. While added supply outside the U.S. may weigh on the market, upstream constraints should offset the pressure. Barring further trade disruptions, copper prices are expected to remain firm with potential for upward movement in the near term.
Source：CNMN.com.cn