Despite a sharp fall in Chinese imports and exports in April, China has remained a major force within the metals market. As FT Alphaville reported earlier on Tuesday, both copper and aluminum imports hit record highs in the month, mostly due to stockpiling.
The impact on the LME copper market can be seen in the following chart from Barclays Capital which reflects just how much the copper curve has flattened out of contango in the month.
That’s quite some stockpiling. Although, if Barclays Capital is correct, China isn’t quite done yet (our emphasis):
China has made no secret of the fact that it is taking advantage of low prices to build strategic inventories of some commodities. In copper and soybeans, we estimate China’s state stockpiling plan is equivalent to about 3% of global supply, and this is likely to have added significantly to recent import tonnages for these two commodities.
Although they do add there are some risks for global commodity markets once the restocking surge has run its course, in which case:
China’s import demand may fall back again, and with little sign yet of a resurgence in commodity demand outside of China, there will be little to take up the slack. Domestic copper prices are already falling back relative to international ones, perhaps indicating that restocking may have run its course.
Related links:
China’s metallic grab - FT Alphaville
China’s fake recovery – FT Alphaville
China drives copper – FT Alphaville