In a bid to cool a rally that has propelled copper prices towards record highs and hit their order books, China's copper producers are planning to export up to 100,000 metric tons of metal, the largest volume in 12 years, according to three industry sources, as reported by Reuters.
The London Metal Exchange (LME) copper prices recently reached two-year peaks of $10,208 a metric ton, close to the record high of $10,845 hit in March 2022, prompting Chinese producers to sell into the rally.
The sources said that the approximately 100,000 tons of copper is likely to leave China over the next few weeks, a volume not seen since May 2012, according to data from Trade Data Monitor (TDM). However, some experts question the logistical feasibility of shipping such a large quantity of copper out of China to LME registered warehouses in such a short timeframe, although they acknowledge it is not impossible.
Two of the industry sources indicated that much of the copper exported from China is likely to come through bonded warehouses in Shanghai, where inventories have risen to 77,800 tons from 6,600 tons at the start of 2024. "China wants to push down the price, end-users are putting their orders on hold," a copper trader said. "But I would be surprised if it was that much."
Despite the planned exports, the volume represents only a fraction of China's total consumption of around 13 million tons a year, or about half of global mined supplies. China, typically an importer of copper, has its own copper resources but not enough to meet its needs.
"LME prices don't translate into what we are seeing in the physical market in China. You can see there is excess metal in stock data and premiums," one of the industry sources said. Earlier this week, the International Copper Study Group (ICSG) projected a global copper market surplus of 162,000 tons this year and 94,000 tons in 2025.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange (ShFE) have risen to above 287,000 tons from around 33,000 tons at the start of this year, nearing four-year highs and signaling sluggish demand. The Yangshan premium dropping to a record low near zero further indicates waning appetite for Chinese copper imports.
"China fundamentals suggest lower prices, but prices are on a tear and smelters keep producing," the copper trader said. Sources say the arbitrage between LME and ShFE prices is making it lucrative to export copper, considering factors such as freight, taxes, and exchange rates.
A source in logistics mentioned that producers had been inquiring about the costs of moving copper from China to LME warehouses. A source at a Chinese copper smelter expects to potentially export 20,000 tons a month if LME prices remain near current levels.
The copper market has been heating up significantly this year due to a squeeze in the supply of mined ore alongside flourishing demand from Artificial Intelligence (AI) and green energy markets, fuelling bets on looming shortages. LME Copper has rallied more than 18 percent year-to-date, while MCX Copper is up nearly 20 percent, rapidly approaching record high levels.
Factors such as supply setbacks at global mines, the rapid expansion of copper smelting capacity, and soaring demand for the metal in electric vehicles, solar panels, and AI technologies have contributed to the bullish sentiment in the copper market. Some experts believe that considering the current factors, the prospect of copper hitting its all-time high of $10,845 per tonne cannot be ruled out in the medium term.
