Since the start of the year, copper prices have been volatile, primarily due to tariff risks and China’s uncertain economic recovery.
According to the ING Group, the optimism over copper demand in China has been fading.
Copper prices have risen by approximately 10% this year, despite trade challenges.
While tightening supply continues to support LME (London Metal Exchange) prices, weakening Chinese economic indicators suggest a growing discrepancy between domestic and international market trends.
Meanwhile, SHFE copper stocks are trending higher again.
SHFE copper stocks have rebounded, reaching a one-month high of over 100,000 tonnes.
This follows a significant drop last month, which saw inventory levels fall to their lowest point since 2022.
Source: ING Research
Domestic smelters looking to export copper
Chinese copper smelters are reportedly preparing to export spot cargoes.
This move aims to capitalise on elevated international prices within a constrained global market, even as domestic stockpiles rise.
The plans were disclosed in a Bloomberg report this week, citing industry sources.
Concerns over potential import tariffs on metals, stemming from US President Donald Trump’s investigation, have significantly impacted global holdings, Ewa Manthey, commodities strategist at ING Group, said.
LME on-warrant inventories have plummeted by 78% this year, reaching their lowest point since July 2023.
Conversely, COMEX warehouse holdings have surged, hitting their highest level since 2018.
Source: ING Research
“The race to get copper to the US before any tariffs are introduced has tightened markets elsewhere,” Manthey said.
Reflecting this tightness on the LME, copper’s cash-to-three-month spread has widened in backwardation, signalling insufficient immediate supplies.
Yangshan premium plunges
While typically a net importer of refined copper, China does export some volumes when it becomes profitable.
This shift is partly due to a surge in domestic supply.
China’s refined copper output reached another record this year, projected to increase by 10% in the first half and nearly 5% for the entire year, according to Shanghai Metals Market.
Amidst a weakening domestic market, China’s planned exports are set to proceed.
Source: ING Research
This week, the Yangshan copper premium plummeted to $38 per ton, a significant drop from last month’s figures of over $100 per ton.
The Yangshan premium is paid on top of global exchange prices and is usually a good measure of Chinese buying appetite, Manthey said. Its peak was just above $150 per ton.
Support remains amid tight supplies for now
Meanwhile, Chinese metal imports declined in May.
Unwrought copper and related products saw a 2.9% drop, and copper ore plummeted 18% from April’s record levels.
This weakening trend is attributed to the economic impact of tariffs, which are considered bearish for copper and other industrial metals, especially in an environment of slowing growth and persistent inflation, Manthey said.
Source: ING Research
Manthey added:
We believe copper prices are likely to stay supported, at least for now, if the LME stocks withdrawals continue.
Some relief for depleted LME inventories could come from China’s copper exports.
“If US tariffs on copper are implemented, this is likely to be bearish for copper prices, with the wave of copper rushing to the US likely to stop, at least for a while, and consumers are likely to then start to work through their inventories.”
This will likely enhance copper availability outside the US, thereby impacting copper prices.
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