Chinese total copper imports (in all forms) revived substantially in July, calming industry fears after June’s abnormally low monthly total undermined market sentiment. Imports in June had slumped unexpectedly 17% year-on-year to 866kt, resulting in a 1% drop in Chinese copper imports in the first half of 2019. Roskill’s provisional assessment indicates that July’s imports reached 1,086kt copper content, a 25% month-on-month surge from June, but only a 1% increase from July 2018. One encouraging sign is that July’s imports were the second highest monthly total so far this year – bettered only by January’s volumes of 1,135kt—hinting that imports might regain some of the lost ground in the second half of the year.
As one encouraging headline indicator of this, copper concentrate imports recorded their highest ever monthly total of 2,070kt gross weight suggesting undiminished demand from the Chinese smelting industry despite painfully low prevailing spot TC/RCs of US$55/t and 5.5 cents/lb. The latest data from the Chinese National Bureau of Statistics supports this trend with refined copper output jumping to 804kt in June, an 11.8% year-on-year increase, and the highest monthly total achieved so far this year. Expectations are that July’s total, when it is published, will post a similar double-digit gain on the year earlier data. Chile and Peru remain the dominant sources of Chinese concentrates imports accounting for almost two-thirds of external supply so far this year.
Another motivation for boosting imports of concentrate, anode and blister by smelters and refiners is the system of quotas that were introduced on imports of scrap from July 1st. Two rounds of quotas have been fulfilled but the gross weight volumes they accounted for only represented around 50% of the volumes imported in the third quarter of 2018. Even with a significant rise of around 20% this year in the contained copper content of the scrap (caused by the outright ban on lower content category 7 imports since the start of 2019) there will, therefore, still be a shortfall in the third quarter. Chinese customers are desperate for further imports and are no doubt thankful that a third quota of 88kt was issued this week but, in reality, they will have to wait until more quotas are released in the fourth quarter.
Shanghai premiums for imported cathode have begun, belatedly, to improve up to US$60-70/t according to local Chinese sources, but this is mainly the result of shrinking availability rather than any improvement in final end use demand. Cathode imports fell 13% to 1,875kt in the year to July and, with SHFE warehouse inventories and bonded stocks also in decline this year, there are some restrictions emerging on availability which the shortage of scrap may fuel. Based on an analysis of end use indicators and apparent consumption calculations, Roskill can find little or no evidence of any increase in Chinese refined consumption in the first half of 2019.