Copper Supply Faces a New China Driven Squeeze

SEATTLE (Scrap Monster): Copper markets are becoming influenced more by physical demand than speculative positioning. While semiconductor equities have weakened over recent weeks, China's changing consumption patterns are creating fresh pressure across global copper supply chains. The result is a market where declining inventories and shifting trade flows are becoming more important price drivers than broader investor sentiment. These developments strengthen the case for a tighter physical market for the coming months.

Natalie Scott-Gray, StoneX Senior Metals Analyst, specializes in global base metals markets and the interaction between physical supply chains and macroeconomic developments. Her analysis focuses on how inventory movements, trade policy and industrial demand combine to shape pricing across international metals markets.

Key Themes from the Discussion

• China's crackdown on circular invoicing has reduced copper scrap availability, increasing demand for refined copper cathode.

• Rising Yangshan import premiums and the reopening of the SHFE-LME import window are encouraging additional imports into China.

• Visible copper inventories outside the United States have fallen to their lowest levels since February 2024 as demand draws metal from both East and West.

China Copper Demand Draws More Metal Into Asia

China's refined copper demand is tightening global availability as domestic policy shifts change consumption patterns. Natalie Scott-Gray explains that a government crackdown on tax-related practices and "circular invoicing" has reduced copper scrap availability, forcing consumers towards refined cathode. Domestic inventories have declined while the Yangshan import premium has climbed to multi-year highs, encouraging additional imports through the SHFE-LME arbitrage window. This shift is drawing copper away from international exchanges and reinforcing tighter conditions across the global physical market.

Global Copper Inventories Face Growing Pressure

Copper inventories are becoming more and more concentrated as both China and the United States compete for available metal. Scott-Gray notes that "LME stocks being drawn from both the west and east" have pushed visible exchange inventories outside the United States to their lowest level since February 2024. As a result, regional shortages are becoming more evident despite relatively comfortable global inventory figures earlier in the year. If seasonal Chinese demand strengthens alongside infrastructure spending, these inventory trends could provide additional support for copper prices during the coming months.