May 10 Copper is probably the best reality check right now for China’s commodity markets, with the industrial metal showing why the recent surge in commodity prices was unjustified, but also why a collapse is not warranted.
China’s imports of unwrought copper fell sharply in April to 450,000 tonnes, down 21.1 percent from March’s 570,000 tonnes, and only up a modest 4.7 percent from the same month a year earlier, according to customs data.
It wasn’t just refined metal that showed a marked pullback from March’s exuberance, with imports of ores and concentrates slipping 8 percent in April from the prior month to 1.26 million tonnes. There are some fundamental factors that help explain the drop in April’s copper imports, such as the closing of the arbitrage window between London and Shanghai prices and bulging domestic inventories.
Copper in warehouses monitored by the Shanghai Futures Exchange (SHFE) CU-STX-SGH hit a record high of 394,777 tonnes in the week to March 18, more than double the 177,854 tonnes at the start of 2016.
This means inventories were rising rapidly at the time when traders would have been placing orders for copper for April delivery.
Inventories have since dropped to 313,168 tonnes in SHFE warehouses, although traders and market participants say the amount of copper in bonded warehouses has risen to the highest so far this year.
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