In a surprising turn, a significant increase in Chinese copper exports has dampened market enthusiasm, causing a sharp 16% decline in copper prices from their peak in May. The sudden export surge has led to substantial sell-offs by investors, challenging previously optimistic projections for the copper market.
China, the world’s largest copper consumer, exported a record 158,000 metric tons of refined copper in June. This brought total exports for the first half of the year to 302,000 tons—surpassing the full-year totals of any year since 2019. This deviation from typical trading patterns has disrupted the bullish narrative driven by anticipated supply constraints and recovering demand.
The weak performance of China’s manufacturing sector, indicated by a dip in the country’s purchasing managers’ indices to a five-month low in July, aligns with the broader pessimistic outlook on copper demand. However, demand issues are only part of the broader market dynamics.
The surge in domestic copper production and a substantial influx of African copper have saturated the local market. Additionally, a severe squeeze on the CME copper contract in May created an atypical export opportunity, allowing excess copper to be shipped out of China.
Domestic Production and Import Trends
According to Shanghai Metal Market, China produced 5.9 million tons of refined copper in the first half of 2024, marking a 6.5% increase from the previous year. This growth contradicts expectations that production would decline following commitments by smelters to cut output due to raw material shortages. Although smelters have experienced some downtime, the overall growth rate has merely slowed rather than reversed.
Simultaneously, China’s copper imports have remained robust. Imports increased by 16% year-on-year to 1.9 million tons in the first half of the year, and scrap copper imports rose by 18% to 1.2 million tons. This influx of both refined and scrap copper, combined with insufficient demand, has led to an oversupply situation.
The Role of the Democratic Republic of Congo
The Democratic Republic of Congo (DRC), now the world’s second-largest copper producer, has become a key supplier to China, surpassing Peru and Chile in copper shipments. In the first half of 2024, Chinese imports of DRC copper surged by 91% year-on-year to 698,000 tons. The increase in imports from the DRC, including a new monthly record of 150,000 tons in June, reflects China’s significant stake in DRC’s mining sector.
However, the limited acceptance of Congolese copper on major exchanges, such as the London Metal Exchange (LME) and the CME, has created market inefficiencies. The LME currently accepts 22 Chinese copper brands, including some Congolese metal, while the CME does not recognize Chinese brands for delivery.
Market Reactions and Future Outlook
The CME’s constrained good-delivery list contributed to the significant premium of CME copper over LME copper in May. As a result, Chinese producers capitalized on an unusual export window, shipping 16,000 tons of refined copper to the U.S.—a rare occurrence due to delivery constraints.
Although CME copper inventory has recovered to 23,620 tons from a low of 8,117 tons in early July, the market remains fragmented. Chinese surplus copper has predominantly flowed to LME warehouses, with LME stocks of Chinese copper increasing substantially to 121,700 tons by June’s end.
Despite a forecasted 2.5% growth in Chinese copper demand for the year, the recent export surge appears to be tapering off, with outbound shipments decreasing to 70,000 tons in July. The Yangshan import premium, which turned negative in May, has rebounded to $53 per ton, indicating potential shifts in market dynamics.
As market conditions evolve, the interplay between export patterns, domestic production, and international delivery constraints will continue to shape the copper market’s future trajectory.
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