China's demand for copper remains strong. This week’s Chinese trade data showed that copper imports rose 25% in March compared to the previous year, reaching a total of 552,317 metric tons (see chart).

Meanwhile, copper imports in the first quarter totaled 1.44 million metric tons, an 11.9% year-over-year increase and the highest first-quarter total since at least 2008.

This increased demand comes amid a situation in which manufacturing activity expanded at a faster-than-expected pace in March following a lull during the Lunar New Year holidays, while activity in the construction sector—which consumes large amounts of copper—has also been growing at a steady pace.

The outlook for commodities—and copper in particular—remains favorable.

A recent GS report argues that, fundamentally, the copper market is currently unprepared for an environment of increased demand resulting from the green transition. As the most cost-effective conductive material, copper is at the heart of the capture, storage, and transportation of these new energy sources. 

The market is already tight because pandemic stimulus measures (particularly in China) have supported a resurgence in demand at a time when supply conditions are stagnant, keeping inventories at historically low levels (see chart). Furthermore, a decade of low returns and ESG concerns have reduced investment in future supply growth, bringing the market closer to peak supply.

Although copper prices have rebounded by 80% over the past 12 months, there have been no significant approvals for entirely new projects. The coronavirus has only exacerbated this trend, creating enough uncertainty to put companies’ investment decisions on hold. This combination of rising demand and inelastic supply has reinforced the current deficit conditions.

Estimates point to a supply gap of 8.2 Mt by 2030, twice the size of the gap that triggered the copper bull market in the early 2000s.

China's Copper Imports (thousands of metric tons)

Copper and Inventories