Copper prices surged to the highest levels since May 2015 in the last few days, prompting the ubiquitous “must mean the economy is doing well” narrative from every hope-fuelled reflationist. There’s just one problem, we’ve seen all this before too many times.
The most recent spike in copper prices has been explained by the news that China may ban imports of some scrap metal, including copper, from the end of 2018, according to an industry association notice, which may lead to higher refined copper imports into the world’s largest consumer of the metal. As Reuters reports, the review of copper scrap imports is part of a broader crackdown by China authorities on imports of foreign waste as it looks to cut pollution from heavy industries to clear its skies.
The recycling branch of the China NonFerrous Metals Industry Association said on Tuesday that it had received a notice that at the end of 2018 imports of scrap metal including wire, motors and bulk scrap metal will be prohibited, according to a copy of an informal Association message sent to members of its WeChat group reviewed by Reuters.
“The market is reacting to the news about China banning scrap cables, scrap motor and other scrap metals from the end of next year, which could block a lot of copper supply into China,” said analyst Li Chunlan at consultancy CRU in Beijing.
However, that narrative does not hold water…
Antaike, a metals research institute under the Association, said that the ban would likely affect less than 1 million tonnes of imports that market participants are speculating could be impacted.
That is because the type of scrap affected by the ban only accounted for about 300,000 tonnes of China’s total 3.35 million tonnes of scrap copper imports in 2016, it said in a report.
SoAs Reuters reports,to Dr.Copper’s Economics PhD…
Metals were also supported by a better demand outlook from China after second-quarter growth beat expectations and the International Monetary Fund raised the country’s 2017 growth forecast.
But, just like it did in November of last year after President Trump’s election, Volume in Chinese copper contracts is massively outpacing Open Interest, suggesting this latest surge is as much speculation-driven as fundamental hope.
Perhaps there is another driver of copper’s rise?
