Copper Markets: Possible Surplus in 2018



Copper surplus

Commodity markets are said to be in a “surplus” when the supply exceeds the demand. Markets are in a “deficit” when the demand is more than the supply. Most market participants, including companies like Freeport-McMoRan (FCX), expect the markets to be in a structural deficit by the end of this decade. In the short term, the outlook has become a little hazy.


China’s copper imports, which are seen as a leading indicator of the country’s copper demand, have been strong. In the first five months of 2018, China’s unwrought copper imports have risen 16.8%—compared to the same period in 2017. The country’s copper concentrate imports have also risen 14.4% during this period.

However, China’s economic data in May showed some softening in the world’s second-largest economy. In the first five months of 2018, China’s fixed-asset investments grew 6.1% year-over-year—the slowest growth in two decades. According to Reuters, China’s retail sales growth in May was the weakest in 15 years.


Since China is the largest copper consumer, the country’s copper demand tends to drive copper prices. In the last two years, China’s better-than-expected economic growth helped lift metal prices. Southern Copper (SCCO), Antofagasta (ANTO), and Glencore (GLNCY) also followed copper higher. However, copper has come under pressure this year. While trade war concerns are certainly impacting copper, fears of a demand slowdown in China and a possible near-term supply surplus are taking a toll on copper prices (DBC).

China might be looking at another stimulus to boost its economy, which we’ll discuss in the next part.

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