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Do Lower Chinese Copper Imports Concern Freeport?


Nov. 20 2020, Updated 2:23 p.m. ET

Lower 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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Imports continue to fall

In October 2016, China imported 290,000 metric tons of unwrought copper and copper products—a yearly fall of more than 31%. Imports also fell on a monthly basis for the seventh consecutive month. Imports in October were at the lowest level 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. Although the country’s imports rose on a yearly basis, they fell compared to the previous month.

Lower demand

Lower Chinese copper imports reflect weak demand in the world’s second-largest economy. We should remember that Chinese copper demand might be crucial for pulling copper out of the long-term bear market. Copper lost 50% of its value in the last five years. The demand growth rate slowed down in China, while some of the new capacity came online.

Despite the near-term headwinds, most market observers expect copper markets to turn into a deficit by the end of the century. You can define a deficit as demand in excess of production. Read Why Copper’s Fundamentals Are Different from Steel and Aluminum to explore copper’s long-term and short-term outlook.

You can also visit Market Realist’s Copper page for more updates.


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