China’s copper imports
China isn’t self-sufficient when it comes to raw material needs. It’s the world’s largest copper consumer. China needs to import raw copper for its smelters and refining plants. While copper mining is concentrated in Latin America (ILF) (ECH), more than half of the world’s copper is consumed in Asia. China is the largest importer of copper ores, anodes, and refined copper. Miners such as Freeport-McMoRan (FCX) and BHP Billiton (BHP) depend on China’s metal demand. To cater to China’s copper demand, Rio Tinto (RIO) is expanding the Oyu Tolgoi mine (TRQ) in Mongolia.
In May, China imported 430,000 metric tons of unwrought copper and copper products. Although imports fell 4.4% compared to April, they have risen more than 18% YoY (year-over-year). However, the sharp YoY increase could also be due to a lower base effect. China’s copper imports were subdued between May and August last year.
Copper ore and concentrate imports, which are processed in China, stood at 1.43 million metric tons in April. Imports have risen more than 45% YoY.
Imports are steady so far
So far, China’s copper products have been better-than-expected in 2016. Higher Chinese copper imports support copper prices as well. It’s important to note that copper imports have to be backed by end user demand. Otherwise, copper would keep stockpiling somewhere in the supply chain. A similar thing happened earlier this year where record Chinese copper imports were accompanied by a record increase in the Shanghai Futures Exchange inventory.
Meanwhile, we saw a surge in the London Metal Exchange’s copper inventory as well as China’s bonded stocks. We’ll discuss this in the next part of the series.