China faces tight copper supply as spot premiums hit multi-year highs

Copper buyers in China are rushing to find physical metal as supplies tighten sharply in the world's biggest consumer market. The premium for spot copper in Shanghai jumped to 2,100 yuan a ton over futures on Thursday, which is the highest level seen since 2021 according to the Shanghai Metals Market. This surge shows that immediately available cathode is becoming very rare due to production cuts by Chinese smelters. This squeeze is also visible in futures markets, where Shanghai copper for December trades at a 900-dollar-a-ton premium to January, marking the steepest backwardation since 2022. The Yangshan premium for imported copper also reached a record 210 dollars a ton. Zhou Xiaoou, an analyst at Zijin Tianfeng Futures Co., notes that the persistent shortage stems from domestic smelter cuts and limited overseas supplies from places like Africa and Russia, forcing fabricators to buy hand to mouth. Global copper prices rallied to record levels earlier this year as expectations of US tariffs on refined metal drew huge volumes toward America and squeezed other markets. That surge has eased in recent weeks due to worries about the strength of the spending boom on data centers. A note from Mysteel explains that the jump in spot premiums comes from the metal shortage rather than sudden demand growth, with large cable manufacturers mainly just topping up thin inventories after a price pullback. Meanwhile, on the London Metal Exchange, copper futures rose 0.4 percent to 14,067 dollars a ton, while aluminum gained 1.9 percent and nickel climbed 2.6 percent.

Context

China is the world's largest consumer of copper, making any disruption in its domestic smelting or import supply chain a major driver for global metal markets. Smelter production cuts and shifts in international trade flows frequently cause sudden price spikes and shifts in trading premiums.