(The opinions expressed are those of the author, a columnist
* Graphic on China's trade in refined copper: tmsnrt.rs/2oMfYOy
* Graphic on China's imports of copper scrap and
By Andy Home
LONDON, April 27 China's imports of refined
copper slumped by 28 percent year-on-year in the first quarter
Factoring in exports, now a regular feature of the country's
trade picture, the slide in net metal imports was an even more
dramatic 35 percent.
The net draw on units from the rest of the world was 699,000
tonnes in the first three months of the year, a decline of
368,000 tonnes on the same period of 2016.
Look no further to understand why copper's early-year bull
run to over $6,200-per tonne, basis three-month metal on the
London Metal Exchange, has stalled. The price is today
trading around $5,720.
Even while production disruptions have accumulated, any
impact on refined metal availability has been muted, witness the
near 185,000-tonne build in global exchange stocks in the first
However, it's not as if China has lost its appetite for
It's just that it has shifted to other forms of the metal.
Graphic on China's trade in refined copper:
Graphic on China's imports of copper scrap and concentrate:
THE SCRAP SURGE
First and foremost copper scrap.
Imports of scrap seemed to be in long-term decline having
fallen in each of the last four years.
Volumes last year were 3.35 million tonnes (bulk weight, not
metal contained), compared with 4.86 million tonnes in 2012.
That steady downtrend, however, has gone into sharp reverse
over the last few months.
Imports accelerated by 22 percent to 907,000 tonnes in
January-March, the highest first-quarter level since 2013.
This is part and parcel of what seems to be a global surge
in scrap supply occasioned by the sharp jump in the copper price
from under $5,000 in the fourth quarter of last year.
This is how large parts of the scrap sector "hedge" their
price exposure. When the price falls, sales of material bought
at higher prices simply dry up. Accumulated stocks are only
released when the price rises to a sufficient level to make them
Discounts for copper scrap in both the United States and
Europe have flexed wider since the fourth quarter of last year,
attesting to much improved availability.
It's no surprise, therefore, to see the world's largest
buyer of copper soak up this cheaper source of metal.
THE CONCENTRATES SURGE
The scrap import surge is a recent phenomenon.
The rise in mined concentrate imports is part of a
longer-running trend rooted in China's build-out of refining
Imports of concentrates have risen every year since 2011
with the pace accelerating in 2016 thanks to much-improved mine
And the trend was extended in the first quarter with inbound
flows of concentrate rising another 8.5 percent to 4.31 million
tonnes (bulk weight).
True, there is clear evidence of the supply hits at Freeport
McMoRan's Grasberg mine in Indonesia and at BHP
Billiton's Escondida mine in Chile.
Imports of concentrate from Indonesia almost dried up
completely in March itself with the first quarter tally of
66,100 tonnes down by a third on last year's equivalent.
Those from Chile, meanwhile, grew by just three percent in
the period after growth of 27 percent last year and the country
was overtaken by Peru as China's top supplier of mined
But compensation came in particular from sharp jumps in
imports from Spain and Kazakhstan, China's sixth and seventh
largest volume suppliers in the first quarter.
Concentrate imports in March itself were 1.63 million
tonnes, still the third highest monthly total on record after
November and December 2016.
WEAKER REFINED COPPER IMPORTS
The steady rise in China's appetite for imported copper
concentrates is part of a long-running trend and one which will
serve eventually to dampen the country's requirement for imports
of refined metal.
However, it's clear that the short-term weakness in refined
metal imports owes more to the turnaround in availability of
Scrap impacts the supply chain in two ways, both negative
for refined metal demand.
Firstly, greater scrap supply means higher production of
refined copper by those refineries capable of handling it as a
raw material feed.
The International Copper Study Group (ICSG) estimates that
global production of refined copper rose by around two percent
in January. Production using concentrates as a feed was flat,
while production from scrap rose by 13 percent year-on-year.
"Increased availability of scrap allowed world secondary
refined production to increase, notably in China where the
upward trend started in 4th quarter 2016," the Group said in its
most recent monthly update.
Secondly, and perhaps even more importantly, the combination
of improved supply and cheaper pricing incentivises many product
manufacturers to increase scrap in their input mix, reducing the
need for refined copper.
The resulting softness in refined metal import demand is
being compounded by continued robust "exports" of copper. These
come from a clutch of producers permissioned to toll-treat raw
materials and export refined copper without paying the
15-percent export tax.
The first-quarter export tally was 105,000 tonnes, compared
with just 43,000 tonnes in the same period of 2016.
Not all of these "exports" necessarily leave the country.
China's customs department counts a shipment as an export even
if the metal only goes as far as a bonded warehouse zone in one
of the country's ports.
At times last year there seemed to be a fairly clear linkage
between China's outbound flows and arrivals at LME warehouses in
The picture has become much murkier with the most recent
high-volume deliveries into the LME's Asian network taking place
at Singapore, to which China has exported only a modest 5,000
tonnes so far this year.
ALL ABOUT SUPPLY
A long-running theme of China's trade in copper is that it
often says as much about supply as it does about the country's
The emergence of scrap as a significant supply source is
accentuating that theme at the moment.
However, it will not last. By its very nature this sort of
price-related destock of scrap is a one-off phenomenon and most
copper analysts are looking for a steady diminution over the
To what extent that translates into a recovery in refined
copper imports by China remains to be seen.
Much will depend on the state of play in the concentrates
part of the supply chain.
Mine supply has taken some big hits in the early months of
this year but it has evidently not yet impacted China's ability
to make more refined copper itself. Production was up by 8.5
percent in March and not all of that increase is attributable to
Smelters have probably been drawing on stocks accumulated
last year in what turned out to be a boom year for mine
They, like everyone else in the copper market, will be
paying close attention to what happens with mine supply over the
rest of this year.
(Editing by David Evans)