(Bloomberg) -- Copper extended last week’s gain as Chinese exports of the key industrial metal dropped in July from an all-time high, suggesting a demand recovery in the world’s largest consumer.
Exports of unwrought copper and products fell 40% to 140,940 tons from June, according to customs data on Sunday. They remain almost double last year’s level.
Overseas warehouses tracked by the London Metal Exchange have been stuffed with Chinese copper after a record-breaking rally in international prices in May. That opened a rare window for exports from the country that buys most of the world’s supply.
The arbitrage window for importing refined copper reopened this month as the Yangshan premium, which measures demand for overseas metal, rebounded. Stockpiles on the Shanghai Futures Exchange have also eased from their June peak.
“Cargoes booked during the export arbitrage window had all been shipped by the end of July, so August’s volume will drop further to the levels seen in normal months,” said Wang Yingying, an analyst with Galaxy Futures Co. “Chinese demand has picked up since last month as power grids increase orders.”
A weaker dollar and data suggesting a reduced risk of a US recession have also supported copper.
Still, copper remains nearly $2,000 below May’s record. The resolution of a strike at the world’s biggest copper mine in Chile has removed some downward pressure on supply. And while China’s smelters pared output in July from the prior month, production was 6.7% higher than the previous year.
Demand, meanwhile, is caught between rising purchases linked to the green transition, and the impact of a protracted downturn in China’s property market and shrinking factory activity.
“We still believe there are more downside risks for copper looking ahead, with the outlook in China remaining challenging,” said Ewa Manthey, commodities strategist at ING Bank NV. “The prolonged crisis in the property market doesn’t show signs of bottoming out yet and we believe this will continue to weigh on copper prices.”
LME copper rose 1.2% to $9,222 a ton by 2:57 p.m. in London, after gaining 2.8% last week. All base metals advanced, with aluminum climbing 2.1% and zinc adding 1.4%.
--With assistance from Sana Pashankar.
©2024 Bloomberg L.P.
