Chinese importers paid a record $205 a tonne above the LME price for imported copper on 28 October, up $17 from the previous day, according to Shanghai Metals Market (SMM). North China spot copper premiums rose 160 yuan in a single day to 690 yuan per tonne as suppliers held back cargo, SMM reported. The premium is the extra cost a Chinese buyer pays to secure imported copper near bonded storage.
Crux Investor notes that a record reading signals physical shortage rather than speculation. LME cash copper averaged $14,522.50 per tonne in October through the 26th, compared with $12,498.98 in March, according to LME data via Westmetall. Shanghai Futures Exchange stocks fell by more than 25% last week, while LME stocks rose, mostly in the United States.
The International Copper Study Group (ICSG) forecasts 2026 world refined copper output of 28.69 million tonnes against usage of 28.59 million tonnes, a surplus of 104,000 tonnes. The surplus is forecast to widen to 368,000 tonnes in 2027. On the supply side, the study group cut its 2026 mine growth forecast to 1.3% from 1.6% in April, citing continued disruption at Grasberg in Indonesia and Kamoa-Kakula in the Democratic Republic of Congo, as well as lower output in Chile.
Scarce concentrate is also limiting smelter output, according to the article. Global exchange inventory exceeds 1.2 million tonnes, double year-ago levels, and nearly all of it is in the United States, as traders wait to see whether President Donald Trump imposes copper import tariffs, Reuters columnist Andy Home reported on 26 October. CME Group is rapidly listing new warehouse capacity in the US.
Sucden Financial noted, per Reuters, that the US stock build already caps the LME price. The outcome of the tariff decision is central to the outlook. If the US excludes refined copper from tariffs, US stocks could become exportable, the Yangshan premium could compress, and surplus metal could move to buyers outside the US.
If tariffs are confirmed or the decision is delayed, China's shortage could persist into 2027. The LME cash premium over three-month copper stood at $199.50 per tonne on 27 October. Margin pressure is falling first on Chinese cable fabricators, which buy copper at exchange prices plus the premium and sell into contracts priced earlier.
SMM reported that North China purchasing sentiment fell on 28 October. ING commodities strategist Ewa Manthey warned, per Reuters, that price-sensitive demand could resist further gains. Crux Investor's analysis concludes that copper is not short worldwide.
It is short in China and plentiful in US warehouses, and US tariff policy, rather than mine output, is determining where the metal sits. Sellers holding refined copper outside the US and producers able to reach Asian buyers currently hold the advantage.
Source: cruxinvestor.com