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Australia Looks To Capitalize on China’s Insatiable Copper Demand

The frosty relationship between China and Australia continues to thaw, as evidenced in the bi-lateral trade indices indicate. Now, thanks to China’s growing copper demand, the world possesses one more indicator. According to recently released data, Australia exported 27,500 metric tons of copper ores and concentrates to China in November last year. At U.S. $44.5 million, this represents the highest-ever recorded shipment for any month after 2020. That was the year China forced its unofficial ban on Australian exports.

Up until the end of 2020, Australia provided China with approximately 80,000 tons of copper concentrate each month. According to reports, this constituted around 5% of China’s overall imports. However, following the establishment of a new government in Canberra in 2022, China gradually lowered tariffs and unofficial restrictions on diverse Australian commodities.

China’s Copper Demand Superseding Trade Issues

Over the last few months, China’s copper imports continued to inch up. This not only includes consignments from Australia but also shipments from the Democratic Republic of Congo, where a prolonged stand-off with the government over taxes previously blocked export efforts. Nonetheless, the surge in Chinese copper demand has the DRC rushing to fill orders.

Furthermore, according to reports, Ivanhoe Mines and Gécamines recently agreed to restart the ultra-high-grade Kipushi zinc-copper-germanium-silver mine. Many expect this to usher in a new phase of production for Kipushi, as it will mean restarting operations almost a century after its 1924 inauguration as the world’s richest copper mine.

Meanwhile, China’s appetite for imported copper has many analysts surprised. A recent report from Reuters notes that the CCP has been piling up record amounts of copper concentrates and recyclable metals since 2018. Last October, for example, China imported 353,000 metric tons of refined copper. After only ten months of 2023, cumulative imports stood at 2.99 million tons, just 4% below 2022 levels.

According to this report, copper put up quite a strong fight compared to earlier years, despite a downward trend in China’s economy (these copper price trends and more on MetalMiner Insights). But in all fairness, copper demand is not only high in China, but across most of the world. In fact, analysts expect the need for copper could further accelerate in 2024.

Why the Growing Need For Copper?

Why is the world so hungry for copper? A subsection of market watchers attribute it to the ongoing transition to green power. Of course, one particular sector driving that shift is electric vehicles. Moreover, manufacturing EVs and switching to renewable energy requires tons of copper. For reference, an EV needs thrice the amount of copper as an internal combustion engine car, and larger vehicles require at least ten times more.

Yet some analysts say the demand timing is all wrong, citing challenges like mining operations delays and disruptions. For instance, analysts from Citi report that investment in China’s power grid surged by more than 6% in 2023, surpassing the growth rates of 1% in 2022 and 5% in 2021.'

In China’s case, the increasing demand for copper, which many expect to reach new highs in 2024, remains puzzling for analysts. However, the country’s opaque system prevents experts from understanding where the CCP will use this imported copper. Will it go to commercial purposes or strategic inventories?

According to a report in The Economic Times, China’s demand for copper and other metals will increase even further this year after the government increases its economic stimuli. Quoting a report from financial firm ICICI Direct, imports of copper products, copper ore, and unwrought copper are all likely to go up in 2024. (to mitigate price risk from rising copper prices, read The Art of Timing Your Metal Buy)

The report even anticipates domestic copper production to increase compared to earlier years. Meanwhile, additional copper demand may come from an uplift in the real estate sector and vehicle manufacturers.

By Sohrab Darabshaw