Copper Supply in Asia Tightens as Tariff Risks Spur Anxiety

(Bloomberg) — The copper market in Asia is tightening, adding to signs of worldwide dislocation, as prices rally hard on speculation that the Trump administration will impose import tariffs on the industrial metal.

In China, the Yangshan premium — a gauge on the additional cost for shipping in refined copper — has nearly doubled this month. In Southeast Asia, meanwhile, import premiums have risen to the highest since last April.

Copper has surged this year on bets that the US will introduce tariffs, with New York futures rallying far more than the global benchmark contract in London. That unusual dislocation has been drawing stockpiles out of non-American markets into the US. Kostas Bintas, a well-known trader at Mercuria Energy Group Ltd., said that the recent shifts have been unprecedented.

“Supplies of imported copper into China are tightening, after cargoes from South America, Congo are diverted into the US,” said Li Yaoyao, an analyst at Xinhu Futures Co.

Net imports into the country already dropped 11% in the first two months of the year as exports more than doubled, with higher global prices opening a rare arbitrage window. Imports may drop as much as a third for April and May from last year, Bloomberg reported last week citing one large trader active in the Asian market.

Falling imports fuel concerns about further draw-down in Chinese inventories later this year amid a peak Spring demand season, maintenance period in the second quarter, just as production cuts loomed at a major top smelter. Chinese inventories have eased this month as consumption picked up post the Lunar New Year break, though still relatively high in this time of the year. 

There are other early signs of tightening in corners of China’s copper market, the world’s largest. The premium for cathode in Guangdong province spiked to more than 200 yuan ($28) ton a ton, according to Shanghai Metals Market. That’s the highest seasonally since at least 2020. The premium jumped following a recent surge in exports from smelters in southern province, according to Xinhu’s Li.

Demand Destruction

Copper’s rapid rally above $10,000 a ton has curbed immediate demand from Chinese factories, however. “Fabricators are not taking copper above 80,000 yuan a ton,” said Nicole Ni, vice general manager at trader Eagle Metal International Pte. 

Still, Chinese copper demand is expected to be underpinned by purchases from grid operators, who are less sensitive to rising costs. Investment in Chinese electricity networks jumped 33% to 43.6 billion yuan in the first two months of the year, according to the National Energy Administration, to absorb more power from a rapid build-out of solar plants.

China will also replenish its strategic reserves of industrial metals including copper and cobalt this year to boost the resilience of its critical minerals supply, according to people familiar with the discussion.

(Updates with Chinese import data, trader comments from 5th paragraph.)

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