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China’s imports of copper are likely to rebound in March, but the expected increase after a disappointing start to the year may not be quite as bullish as it appears at first glance.

A range of factors, including port congestion, issues loading at major producer Chile and an ongoing unofficial boycott of imports from Australia, led to China’s imports of both unwrought copper, and ores and concentrates failing to set the heather on fire in the first two months of the year.

The first two months of 2021 saw unwrought copper imports of 884,009 tonnes, up 4.65% from the same period in 2020, according to data from China’s customs bureau. Since 2020 it hasn’t provided separate figures for January and February, possibly to smooth out the volatility around the Lunar New Year holidays.

To be sure, a 4.65% increase doesn’t sound too shabby. But it’s worth noting that China’s copper imports have been on a downward trend in recent months, something apparently at odds with the ongoing rebound in the world’s second-biggest economy amid stimulus measures.

What’s more, a closer look at unwrought copper imports on a tonnes per day basis shows the January-February imports are 14,980 tonnes – down from 16,530 tonnes in December and 18,710 tonnes in November.

Imports of copper ores and concentrates were 3.79 million tonnes in the January-February period. That’s equivalent to about 64,000 tonnes per day and up marginally from the 62,600 tonnes from the same period last year.

The first two months of the year were also slightly higher than the 61,000 tonnes per tonne recorded in both December and November. But again, the increase was nowhere near enough to be described as bullish.

It’s likely that problems with securing supply were largely behind the drop in imports of copper ores and concentrates, especially in the light of the ongoing dispute with Australia – formerly China’s fifth biggest supplier of the industrial metal.

China’s imports of Australian copper concentrates dropped to zero in December. That’s the first time in 16 years no arrivals were recorded, and down from 110,930 tonnes in the previous December, according to the latest available official figures.

Similar to China’s ban on Australian coal, it will take the market some time to adjust to the new dynamic. Australia is selling to other copper-smelting nations, such as Japan and South Korea, while China attempts to diversify its supply sources.

This will likely see China’s imports of ores and concentrates recover over time. But there is still a question over imports of unwrought copper, which include refined metal rods and other products.

While March and April arrivals will likely be solid, this is probably more of a catch-up after the soft-ish start to the year, rather than any inherently bullish signal.

Mixed outlook

There are certainly still reasons to be optimistic on China’s copper demand, but much will depend on how long and how large Beijing’s ongoing economic stimulus goes as China recovers from the coronavirus pandemic.

An official target of 6% economic growth does sound fairly bullish. However, there are also signs that Beijing is becoming cautious about too much borrowing to fund the traditionally copper-intensive construction and infrastructure sectors.

There are also a few bearish factors on copper’s horizon in China. Stocks in warehouses monitored by the Shanghai Futures Exchange rose for a sixth consecutive week to 171,794 tonnes in the week to March 12 – the highest level in six months.

While Chinese smelters have been boosting output, the rising price of the metal has eroded margins, with research consultancy Antaike saying on March 11 the spot treatment charges for copper concentrate dropped to $35.50 a tonne last week, the lowest in a decade.

The global benchmark copper price in London hit a 9-1/2 year high of $9,617 a tonne in February, but has since lost some ground to end at $9,085 on March 12.

High global copper prices may act as a drag on Chinese demand, especially if the arbitrage window between international and domestic prices isn’t high enough to attract speculative investments and imports into China, as is currently the case.

Overall, China may not be the strong bullish case for copper in 2021 that it was in 2020. That leaves the market having to decide whether stimulus spending in the rest of the world will be enough to sustain the case for higher prices.

Of course, copper price expectations can be shifted quickly by unexpected supply disruptions, but if supply is largely as forecast, the bullish case probably lies outside China this year.

(By Clyde Russell; Editing by Kenneth Maxwell)