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Sluggish Chinese Copper Imports Spell Trouble for Freeport

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Chinese copper imports

China isn’t self-sufficient when it comes to its copper needs. It’s the largest copper importer. While copper mining is concentrated in Latin America (ILF), more than half of the world’s copper is consumed in Asia. China is the largest importer of copper ore, anodes, and refined copper.

Miners such as Freeport-McMoRan (FCX) and BHP Billiton (BHP) depend on Chinese metal demand. To cater to China’s copper demand, Rio Tinto (RIO) is expanding its Oyu Tolgoi mine (TRQ) in Mongolia.

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Sluggish imports

In September 2016, China imported 340,000 metric tons of unwrought copper and copper products—a yearly fall of more than 25%. Imports also fell on a monthly basis for the sixth consecutive month. Imports in September were at their lowest since February 2015. Falling Chinese imports are negative for copper miners such as Freeport.

Imports of copper ore and concentrate, which are processed in China, stood at ~1.4 million metric tons in September. Though the country’s imports rose on a yearly basis, they fell compared to the previous month.

Impact on copper producers

Chinese copper imports rose steeply earlier this. However, because imports weren’t backed by real end user demand, some copper found its way into bonded warehouses and the SHFE (Shanghai Futures Exchange). As a result, SHFE copper inventories rose to record highs.

As China’s refined copper imports started to taper down in April, we saw big drawdowns in the SHFE copper inventory. Its inventory has fallen ~290,000 metric tons since mid-March.

An uptick in Chinese copper demand could be crucial for Freeport-McMoRan. You can read Freeport-McMoRan’s 4Q16 Outlook: Can Its Stock Return to Life? to explore the importance of China’s copper demand for Freeport.

You can also visit our Copper page for ongoing updates on this industry.

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