CMB Macro: Fluctuations in the price of US copper from the perspective of inventory and tariffs

Event: On July 31, 2025, BEA released the inventory and sales data by industry for May 2025 in the United States. The total inventory in May increased by 2.62% compared to the previous year, down from 3.15%. The total sales in May increased by 3.30% compared to the previous year, down from 3.68%. The May data shows that the United States has further confirmed its entry into the proactive destocking phase. The period of aggressive imports by the United States was from November 2024 to March 2025, and imports in April-May 2025 have returned to normal levels. However, combined with the estimated sub-index of imports in the US PMI, there may still be a brief restocking demand in June-July. It is expected that the excess imports may be exhausted by November, at which point the impact of US tariff inflation may be fully manifested. In addition, the recent rapid decline in the price of copper in the US is due to Trump's decision to impose a 50% tariff on copper products and derivatives while exempting copper raw materials. This has caused copper that was aggressively imported and hoarded in the US in the past month to be unable to lock in the original price including the tariff. Therefore, if similar situations occur with other products where imports due to tariffs are not as expected, the balance of supply and demand can easily be broken, leading to significant price adjustments. Overall inventory cycle: There may still be a brief restocking demand in June-July, followed by continued proactive destocking. The total inventory in the US in May increased by 2.62% compared to the previous year, down from 3.15%. The total sales in May increased by 3.30% compared to the previous year, down from 3.68%. The May data shows that the United States has further confirmed its entry into the proactive destocking phase. The period of aggressive imports by the United States was from November 2024 to March 2025, and imports in April-May 2025 have returned to normal levels. However, combined with the estimated sub-index of imports in the US PMI, there may still be a brief restocking demand in June-July. Assuming an import consumption rate of $700 billion per month starting in August (based on the decline rate seen in March-April), with the first round of excess imports totaling $1800 billion and the second round totaling $1000 billion, it is expected that the excess imports may be exhausted by November, at which point the impact of US tariff inflation may be fully manifested. US industry inventory cycle: Half of downstream industries may enter proactive destocking. In May, 6 out of the 14 major industries were in a proactive destocking phase, including upstream industries such as petroleum, natural gas, and fuel for consumption; chemical products; midstream transportation; downstream automotive and automotive parts; textiles, clothing, and luxury goods; and food, beverages, and tobacco. Looking at the historical percentile of inventory changes, the overall inventory change in May was at 32.4%, with construction materials (83.6%), chemical products (69.3%), metals and mining (56.3%), paper and forestry products (53.6%), and technology hardware and equipment (52.7%) being the industries with relatively high historical inventory percentile. Upstream: Petroleum and chemicals may be in proactive destocking, while building materials and metals may switch to proactive destocking. 1) Petroleum, natural gas, and fuel for consumption: Were in a proactive restocking phase from July 2023 to May 2024, switched to proactive destocking in June 2024, and have been in proactive destocking until May 2025. 2) Chemical products: Were in a passive restocking phase from August 2024 to March 2025, and may have switched to proactive destocking in May 2025. 3) Building materials: Were in a proactive restocking phase from February to September 2024, switched to passive restocking in October 2024, and have been in passive restocking until May 2025. 4) Metals and mining: Entered passive restocking in February 2024 and have been in passive restocking until May 2025. Midstream: Transportation may be in proactive destocking, while paper and forestry products, electrical equipment, appliances, and components may be in passive restocking, and machinery manufacturing may have already entered proactive restocking. 1) Paper and forestry products: Were in a proactive restocking phase from December 2023 to January 2025, switched to passive restocking in February 2025, and have been in passive restocking until May 2025. 2) Electrical equipment, appliances, and components: Were in a proactive restocking phase from July 2024 to November 2024, switched to passive restocking in December 2024, and have been in passive restocking until May 2025. 3) Machinery manufacturing: Were in passive destocking from December 2023 to February 2025, may have switched to proactive restocking in March 2025, and have been in proactive restocking until May 2025. 4) Transportation: Entered passive restocking in June 2024, and may have entered proactive restocking in April-May 2025. Downstream: Three industries are still in passive restocking, while three industries may enter proactive destocking. 1) Automotive and automotive parts: Were in passive restocking from April to November 2024, switched to proactive destocking in December 2024, and have been in proactive destocking until May 2025. 2) Durable consumer goods: May have entered passive restocking in August 2024, and have been in passive restocking until May 2025. 3) Textiles, clothing, and luxury goods: Entered passive restocking in July 2024, and may have entered proactive restocking in April-May 2025. 4) Food, beverages, and tobacco: Entered passive restocking in July 2024, and may have entered proactive restocking in April-May 2025. 5) Daily consumer goods distribution and retail: Entered passive restocking in July 2024, and have been in passive restocking until May 2025. 6) Technology hardware and equipment: Entered passive restocking in April 2024, and have been in passive restocking until May 2025. This article was reprinted from the WeChat public account "CMB Macro Insights," GMTEight editor: Yan Wencai.