A Puzzle: What’s China Doing with So Much Copper?



A puzzle

While China is the largest copper consumer, it isn’t self-sufficient in its raw material needs. China needs to import raw copper for its smelters and refining plants. Copper mining is concentrated in Latin America (ILF) (ECH) while more than half of the copper is consumed in Asia. China is the largest importer of copper ores, anodes, and refined copper. Miners including Freeport-McMoRan (FCX) and BHP Billiton (BHP) depend on Chinese metal demand. Rio Tinto (RIO) is building the Oyu Tolgoi mine (TRQ) in Mongolia to cater to China’s copper demand.

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Copper imports rise

China’s copper concentrate imports were the second highest ever in February. Imports rose more than 92% YoY (year-over-year). The steep rise in China’s February copper imports took many investors by surprise. Generally, February is a slow month for China’s copper imports due to the Lunar New Year holidays. China’s February copper concentrate imports fell 10% and 18% month-over-month, respectively, in 2014 and 2015. This year, China’s February copper concentrate imports rose almost 25% month-over-month.

Strong YTD increase

In the first two months of the year, China’s copper concentrates have risen more than 55% as compared to the corresponding period last year. Imports of copper products have also increased 23% over this period. Looking at the trend in China’s monthly copper imports, we started to see big spikes starting November 2015 as can be seen in the graph above. The country imported more than 1.4 million metric tons of copper concentrates in November and December. Imports of copper products were also strong over this period. Chinese copper demand is not growing at such a scorching pace. So, what’s the country doing with so much copper? We’ll explore this in the next part of the series.


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