Chinese copper producers, traders ride price wave
Beijing — China’s copper producers and traders are riding an unexpected surge of business that has pushed physical prices to their highest levels in nearly two years as fabricators rush to buy refined metal to avoid import tariffs on scrap from Thursday.
The buying spree took off after Beijing announced two weeks ago it would hit $16bn worth of US imports, including scrap metal, with duties of 25% from August 23 in retaliation for a similar move by Washington.
The US is one of China’s biggest copper scrap suppliers. The surge has given short-term relief to the world’s top market for the metal, often taken as a bellwether for the health of China’s economy.
Demand growth had slowed just as a wave of new capacity was due to start up. Physical copper premiums in China jumped to as high as $91 a ton this week, the most since November 2016, and are up 13% in the past two weeks alone.
Five weeks ago, the premiums were languishing at near 10-month lows. Chinese copper importers pay premiums for physical deliveries on top of benchmark London Metal Exchange futures prices, which have fallen about 18% since hitting a four-year high on June 7. Three traders attributed the spike to tighter supply of scrap copper. "Some people who use scrap are turning to cathode, especially cheap African cathode," said a trader based in Hong Kong. The Democratic Republic of Congo and Zambia are two of the world’s top copper producers.
Cathodes are refined copper typically processed into rod and wire and used in infrastructure and construction.