China's copper imports may rise

China’s copper imports may rebound in March, but after a disappointing performance at the beginning of the year, the expected growth in copper imports may not be as optimistic as it seems at first glance.

A series of factors, including port congestion, loading problems in Chile, a major producer, and unofficial boycotts of imports from Australia, led to disappointing performance in China's imports of unforged copper, ores and concentrates in the first two months of this year.

According to Chinese customs data, in the first two months of 2021, China's unforged copper imports amounted to 884,009 tons, an increase of 4.65% over the same period in 2020. Since 2020, it has not provided separate data for January and February, possibly to eliminate fluctuations around the Lunar New Year holiday.

To be sure, the 4.65% increase does not sound too shabby. However, it is worth noting that China's copper imports have been on a downward trend in recent months, which is clearly inconsistent with the continued rebound of the world's second largest economy under stimulus measures.

In addition, a closer look at the daily import volume (in tons) of unforged copper reveals that the import volume from January to February was 14,980 tons, which was lower than the 16,530 tons in December last year and 18,710 tons in November.

From January to February, the import volume of copper ore and copper concentrate was 3.79 million tons. This is equivalent to about 64,000 tons per day, slightly higher than the 62,600 tons in the same period last year.

The first two months of this year were also slightly higher than the 61,000 tons/ton in December and November last year. But again, this increase is far from enough to be called bullish.

The main reason for the decline in copper ore and copper concentrate imports may be the issue of supply security, especially considering the ongoing dispute with Australia (Australia was China’s fifth largest copper supplier).

In December last year, China's imports of Australian copper concentrate fell to zero. According to the latest official data, this is the first time in 16 years that there is no entry record, and the import volume in December of last year was 110,930 tons.

Similar to China's ban on Australian coal, it will take time for the market to adjust to the new dynamics. Australia is selling copper to copper smelting countries such as Japan and South Korea, while China is trying to diversify its supply sources.

Over time, China's ore and concentrate imports may recover. However, there are still problems with the import of unwrought copper, including refined metal rods and other products.

Although the March and April data may be robust, this is more likely to be a catch-up after the weakness at the beginning of the year, rather than any inherently bullish signal.

Of course, there are still reasons to be optimistic about China's copper demand, but this largely depends on how long and how large the ongoing economic stimulus plan will last as China recovers from the coronavirus pandemic.

The official 6% economic growth target does sound quite optimistic. However, there are also signs that China is becoming cautious and unwilling to borrow too much to fund traditional copper-intensive construction and infrastructure industries.

In China, the outlook for copper also has some bearish factors. The warehouse inventory monitored by the Shanghai Futures Exchange rose for the sixth consecutive week in the week ending March 12 to 171,794 tons, the highest level in six months.

Although China has been smelter to increase production, but the rising price of copper grid eroded profit margins, research and consulting firm Antaike (Antaike) March 11, said spot copper concentrate treatment charges last week to $ 35.50 a tonne, The lowest in 10 years.

In February of this year, the benchmark copper price in London hit a nine-and-a-half-year high of US$9,617/ton, but it has since fallen back and closed at US$9,085 on March 12.

High global copper prices may drag down China's demand, especially if the arbitrage window between international and domestic copper prices is not enough to attract speculative investment and imports into China. This is the current situation.

In general, China may not be as strong as 2020 as a strong reason to be optimistic about copper in 2021. This makes the market have to decide whether stimulus spending in other parts of the world is sufficient to support price increases.

Of course, copper price expectations may change rapidly due to unexpected supply interruptions, but if the supply is basically as expected, this year's bullish market may be outside of China.