Copper Rebound Continues as Market Eyes China Arbitrage

(Bloomberg) -- Copper extended its rebound from the lowest close in five months as orders to withdraw the metal from London Metal Exchange warehouses suggested China’s demand slump may have bottomed out.

Three-month futures rose 1.3% as of 3:11 p.m. in London, fueled in part by the biggest cancellation of LME copper since April.

The gain comes after a surge in cathode exports from China and into the LME network caused copper prices to slump 19% from May’s record. China accounts for more than half of global copper consumption, and the exports, combined with weak industrial data, undercut bullishness around its demand prospects in artificial intelligence data centers.

Since then, an arbitrage window to import refined copper to China has reopened, causing premiums for the metal there to rise, while orders to withdraw units from the LME have started increasing. LME data Monday showed on-warrant stocks dropped by 7,375 tons.

Meanwhile, global investors are tentatively returning to buying equities, bonds and commodities, a week after markets collapsed on fears of a global economic slowdown. Copper rose late last week following signs of resilience in the US labor market, paring a fifth week of losses driven by fears about the global economic outlook.

Copper may rebound toward $9,100 a ton as concerns over the possibility of a global recession ease, Jinrui Futures Co. said in a note. Investors are still waiting for clearer guidance from the macro economy and more inventory drawdowns, it added.

Still, the upside for copper may be limited due to a global surplus, according to Macquarie Group.

“Updates to demand and refined production have pushed the market to a surplus sooner than expected,” and that’s expected to linger for the next two years, analysts led by Alice Fox wrote in a note emailed Monday. They see copper averaging $9,000 a ton for the rest of this quarter and $9,175 for 2025.

All base metals advanced, with lead gaining 1.4%.

--With assistance from Sana Pashankar.