China’s copper exports hit a record as deflation bites at home

Exports of unwrought copper and products in May doubled from the previous year to nearly 150,000 tons, just topping the previous high reached in 2012, according to the latest customs data.

It’s a dynamic that has played out across commodities markets where China is the dominant supplier, from aluminum to animal feed. Producers have been locked in deflation for much of the past two years due to a tepid economy, opening up opportunities abroad where prices are higher, but also provoking trade tensions for items like steel.

Chinese factories were balking at paying up for copper when the global market climbed to an all-time high last month. Although prices have since receded, both spot and import premiums in China have remained negative, indicating that consumption is still sluggish.

The pullback in international prices since mid-May will likely take the edge off exports going forward, said Ji Xianfei, an analyst with Guotai Junan Futures Co. “Overseas shipments should have come off a bit recently given shrinking export profits,” he said.

Unusually, the spike in exports also coincided with firmer-than-expected imports, which could show some traders stockpiling the metal in anticipation of demand rising later in the year.

China’s smelters are at least starting to pare their production of refined copper from the record levels seen in recent months, according to the latest output figures for May, although the decline is more likely linked to a global shortfall in raw materials rather than a response to weak demand.