In the three weeks since we last visited China, the Chinese physical copper market has tightened further. To pick up on just one number, at the time we last wrote about China, mainstream social inventories were 102,100t — down 30k tonnes year-on-year. Recently, that number has fallen further: 89,100t on September 17, then again to 74,800t on September 21, with the YoY difference more than doubling to 65kt below the same period last year.

Meanwhile, mounting smelter pressure is now showing up in operating plans. SMM reports that some smelters have signalled production cuts and told customers long-term cathode deliveries will be reduced.

Any further smelter cuts would land in a market already sitting on a thin inventory cushion.

If domestic cathode supply tightens enough, China may need to reverse this year’s weak import trend and lean more heavily on overseas refined copper. That is where a Chinese smelter problem starts affecting global refined-copper flows.

Physical copper availability in China has tightened.

Inventories and premiums have moved together:

Domestic supply risk is rising after the inventory draw.

Smelters have kept producing through poor margins so far. China produced 1.147 Mt of cathode in August, while SMM estimated a spot-concentrate smelter was losing 2,091.57 yuan/t including by-product revenue.

Several pressures on smelters have intensified since then:

And, as we looked at several weeks ago, scrap availability (~25% of China’s refined production feedstock) has also been tightening.

The new development is that some smelters are now signalling production cuts and reduced long-term cathode deliveries. Until now, collapsing TCs had not produced a broad enough supply response to materially change the refined-output story.

So has China started to pull copper in from abroad yet?

China has yet to start pulling in more copper from abroad in any sustained sense.

Indeed, through August, China was still reducing its call on foreign refined copper. Electrolytic-copper imports fell to 210,200 tonnes in August, down 20.5% year-on-year, while exports rose to 50,400 tonnes, up 37.0%. That left net refined imports at roughly 160,000 tonnes, around 30% below the same month last year. Across January-August, imports were down 15.2% YoY to 1.884 Mt, leaving net imports of about 1.475 Mt.

However, the conditions that kept overseas copper relatively unattractive to Chinese buyers earlier this year are beginning to change.

Average Yangshan B/L premiums rose from around $85/t during September 7-11 to $111/t during September 14-18, indicating imported cathode is becoming more valuable inside China. Over the same period, bonded-zone inventories fell from 38,800 tonnes to 34,500 tonnes as metal was pulled into the domestic market.

Import economics have also improved substantially from their summer extremes, although not yet on a consistently favourable basis. And SMM says the narrowing COMEX-LME spread has weakened the North American “siphon effect” that diverted internationally available cathode toward the U.S. earlier this year.

So China is not yet pulling substantially more refined copper from abroad. But the conditions are moving in that direction: domestic and bonded inventories are falling, imported metal commands a higher premium, and U.S. competition for international cathode has eased.

What is still missing is the trade-flow response. A sustained rise in China’s net refined-copper imports would be the clearest evidence.

Now → mid-October: Do social inventories keep falling after National Day stockpiling ends? Watch whether Yangshan premiums stay elevated and bonded stocks continue to draw.

October: September trade data. A clear rise in net refined-copper imports while domestic stocks stay low would show China leaning more heavily on the international market.

October-November: Do scheduled maintenance and signalled cuts produce a material decline in cathode output? Also watch the COMEX-LME spread for renewed U.S. competition for internationally available cathode.

Q4: If Chinese net imports rise, watch for tighter inventories or premiums elsewhere. That would show China’s domestic shortfall starting to spill into the global market.

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/ Copper prices bounce as U.S. runs out of warehouse space

COMEX’s main delivery hub is largely full after months of tariff-driven stockpiling. With another ~100kt more copper still due in September-October, the tariff trade may be running into a very literal constraint: there’s nowhere left to put the metal.

That’s the wire for today. Until next time, don’t run the buffer dry.

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