News

Aug 08, 2023

Column: China imports less refined copper but raw materials surge

A view at the ENAMI's (National Mining Company) copper cathodes plant at Tierra Amarilla town, near Copiapo city, north of Santiago, Chile, December 15, 2015. REUTERS/Ivan Alvarado LONDON, Aug 1

A view at the ENAMI's (National Mining Company) copper cathodes plant at Tierra Amarilla town, near Copiapo city, north of Santiago, Chile, December 15, 2015. REUTERS/Ivan Alvarado

LONDON, Aug 1 (Reuters) - China's imports of refined copper fell to a four-year low in the first six months of 2023, underlining the sense of stalled momentum in the world's manufacturing powerhouse.

The country is the world's largest buyer of refined copper and its loss of import appetite has dashed hopes for a turbo-charged rebound from last year's stringent COVID-19 restrictions.

The copper market, like those for many other industrial metals, is now awaiting more government stimulus, hoping a boost to domestic demand can compensate for weak export markets.

China's visible copper stocks are low, meaning that any significant shift in demand impetus could quickly reinvigorate imports.

However, the continued strength of copper raw material imports is translating into record domestic refined metal production, a structural shift towards self-sufficiency that is likely to dampen demand for imported units going forwards.

China imported 1.65 million metric tons of refined copper in the first half of 2023, down by 12% on the first half of last year and the lowest first-half tally since 2019.

Even at that, the headline figure flatters to deceive slightly since this year's imports included 48,000 metric tons of Chinese copper, likely metal that was sitting in a bonded warehouse waiting for exports to be redirected back to the mainland market.

China's huge copper imports are offset against a smaller outbound flow of metal mostly produced under raw materials tolling contracts.

The net import figure is the best indicator of the country's pull on units from the rest of the world and on this basis imports were weaker still, dropping by 13% year-on-year to 1.48 million metric tons.

Two absences are worth noting.

There has been no import surge from either Russia or the Democratic Republic of Congo.

While China has soaked up surplus Russian aluminium shunned by Western users, there has been no change of copper import pattern since Moscow's February 2022 invasion of Ukraine.

China's imports of refined copper from Russia fell by 20% in 2022 and they dropped another 10% year-on-year to 137,000 metric tons in the first half of this year.

Imports of Congolese copper rose by a modest 4% to 366,000 metric tons in January-June with no sign of extra flows from the stockpile accumulated by China's CMOC Group (603993.SS) during an eight-month export ban.

The company said it began shipping metal again in late April after the stand-off with the government over mineral royalties was resolved.

Given the company produced 254,000 metric tons of refined copper at its Tenke Fungurume operations last year, there could be a lot of metal on its way to China in the coming months.

While China's refined copper appetite waned in the first half of the year, its imports of mined concentrates continued to accelerate.

May imports of 2.6 million metric tons marked an all-time monthly high and first-half imports of 13.4 million were also a new record.

China absorbed almost 950,000 metric tons more concentrate in the first six months of this year than it did in the same period of 2022.

Imports of scrap copper, meanwhile, rose by 10% to 973,000 metric tons in the first half of the year.

Scrap shipments are still recovering from 2020, when Beijing was planning a total ban on what it termed "foreign garbage". The government backtracked in the face of intense industry lobbying to allow higher-grade "recyclable resources" to enter the country.

Imports have been trending higher ever since, particularly from traditional trading partners in Europe and the United States.

It is worth bearing in mind that the copper content of what enters China is now much higher than was the case before 2020, making recyclable metal an increasingly important component of the country's copper import mix.

The combination of record imports of concentrates and rising scrap flows has allowed Chinese smelters to aggressively ramp up production.

The country's copper cathode output was 917,900 metric tons in June, representing a 7% year-on-year increase, according to local data provider Shanghai Metal Market.

Cumulative production over the first half of this year surged by 11% to 5.6 million tonnes with the country's producers consistently breaking new output records.

Despite a lengthening list of supply disruptions, particularly in top producer Chile, China's smelters are evidently not struggling to find raw materials.

Indeed, the China Smelters Purchase Team has lifted the third-quarter guidance for copper concentrate processing treatment and refining charges (TC/RCs) to a near six-year high amid abundant supply.

The rates, decided at a meeting of the China Smelters Purchase Team last month, were $95 per metric ton and 9.5 cents per pound.

They are the highest TC/RCs since the fourth quarter of 2017 and above this year's annual benchmark of $88/8.8.

Treatment charges rise when there is good availability of raw materials and fall during periods of tightness.

Current elevated levels suggest there is plenty of concentrates around and smelters will likely continue to run at high utilisation rates over the coming months.

China has been building out copper processing capacity in recent years in a bid to increase self-sufficiency in what is classified as a strategic commodity.

The country remains a big importer of copper in all forms but the cyclical ebb and flow of refined metal imports masks an underlying trend towards ever more raw materials in the import mix.

The copper market is currently betting that low visible stocks will force a pick-up in refined imports over the second half of the year, particularly if demand bounces back after a disappointing first half of the year.

The continued strength of raw material flows into China, however, suggests any recovery in refined metal shipments may be more muted than expected.

The opinions expressed here are those of the author, a columnist for Reuters.

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Senior metals columnist who previously covered industrial metals markets for Metals Week and was EMEA commodities editor at Knight-Ridder (subsequently Bridge). Started up Metals Insider in 2003 and sold it to Thomson Reuters in 2008, he is author of ‘Siberian Dreams’ (2006) about the Russian Arctic.