Chinese Buyers Boost Copper Prices Amid Ample Global Supply

Key Moments

Chinese Demand Supports Price Rebound

ING analysts Warren Patterson and Ewa Manthey note that copper prices on the London Metal Exchange (LME) have moved back above $13,000/t as Chinese participants returned from the Lunar New Year holidays on Tuesday and increased their import appetite.

They highlight that the Yangshan copper premium – a gauge of China’s import demand – has climbed to $53/t, a two-month high, from around $33/t before the Lunar New Year holiday. According to the analysts, this shift signals growing buying interest from Chinese customers.

Inventories Remain Elevated Despite Demand Improvement

The analysts caution that the improvement in demand is occurring against a backdrop of high inventories. They state that Shanghai Futures Exchange (SHFE) stocks remain elevated following seasonal builds, while LME inventories have continued to trend higher.

This combination suggests that, even with the recent rebound in Chinese demand, the global copper market is still well supplied for the time being.

Time Spreads Signal Ample Nearby Availability

ING points out that LME time spreads remain in a deep contango, which they view as evidence of ample nearby availability of copper. While stronger Chinese imports should help absorb some of the excess material, the analysts argue that a more pronounced and sustained tightening in time spreads will likely require clearer signs of inventory declines in both China and on the LME.

Market Outlook and Key Indicators to Watch

The analysts observe that the market is showing early indications of a demand recovery. However, they emphasize that persistently high inventory levels are likely to limit the speed and extent of any near-term tightening in copper fundamentals.

They identify the next key indicator as the behavior of the import arbitrage. In their view, the crucial question is whether the arbitrage remains open and results in ongoing draws from LME stocks, together with a faster-than-seasonal reduction in SHFE inventories.

Speculative Positioning Across Base Metals

Patterson and Manthey also review recent positioning data from the latest LME Commitments of Traders Report (COTR). They report that funds cut their net long in copper by 3,393 lots to 33,882 lots, which they describe as the lowest level since October 2023.

Money managers also scaled back exposure in other base metals. Net long positions in aluminium were reduced by 4,486 lots to 92,972 lots. In zinc, speculative positions declined by 844 lots after five consecutive weeks of gains, leaving the net long at 44,587 lots.

Positioning Summary