China's Copper Import Stability Masks Geopolitical Tensions and Supply Chain Shifts

China’s unwrought copper imports held steady at 438,000 tonnes in April 2025 compared to the same period in 2024, defying expectations of a decline amid rising U.S.-China trade tensions. While the data appears neutral on the surface, the underlying dynamics paint a far more complex picture of a market strained by geopolitical friction, structural supply shortages, and shifting demand patterns.

Geopolitical Tensions Redefine Trade Flows
The stability in April’s import figures masks a dramatic reshuffling of global copper supply chains. U.S. tariffs, including a 10% baseline duty and a 125% surcharge on Chinese goods, have created a “scrap vacuum” in Asia.

The Yangshan premium, which measures China’s willingness to pay above LME prices, surged 43% in April alone. This reflects a stark reality: Chinese buyers are bidding aggressively for scarce refined copper to compensate for blocked scrap imports from the U.S. (previously 40% of scrap supply). Meanwhile, U.S. inventories swelled by 61% since March, as traders redirected shipments to avoid retroactive tariffs.

Market Dynamics: Backwardation and Strategic Buying
The Shanghai Futures Exchange (SHFE) faced a record 136,000-ton inventory drawdown in April—the largest four-week decline on record—driven by buyers locking in prices during the March dip to $8,600/ton. This backwardation (where near-month contracts trade at a premium) signals physical scarcity, with traders like Trafigura and Mercuria scrambling to secure supplies.

The contango structure in futures markets—where distant contracts now trade at a 2.2% premium—hints at expectations of stabilized supply chains or Chinese stimulus measures to boost infrastructure spending. However, the $9459.50/ton LME price rebound by late April underscores how geopolitical risks have become a self-fulfilling prophecy: fear of supply shortages drives speculative buying, further inflating prices.

Domestic Policies Fuel Structural Demand
China’s $300 billion yuan investment in recycling infrastructure and the launch of China Resources Recycling Group (October 2024) aim to reduce reliance on scrap imports. Yet progress remains slow, with domestic recycled copper output at just 4.3 million tonnes in 2024—insufficient to offset the loss of U.S. scrap. Meanwhile, State Grid’s 25% year-over-year spending increase on power infrastructure and a 60% rise in grid equipment investment highlight copper’s role in China’s green transition.

Investment Implications: Navigating Volatility
The April data’s stability is a mirage. Investors must monitor three key indicators:
1. U.S.-China trade negotiations: A resolution could unlock a price surge toward $5.20/lb ($9,500/ton), while prolonged tensions risk deeper regional imbalances.
2. Yangshan premium trends: A sustained premium above $90/ton signals physical shortages, favoring long positions in copper ETFs (e.g., COPX) or mining stocks like Freeport-McMoRan (FCX).
3. SHFE inventory levels: A rebound from current lows could indicate demand softening, but further drawdowns would amplify backwardation.

Conclusion
China’s April copper imports at 438,000 tonnes reflect neither strength nor weakness but a precarious equilibrium. Geopolitical tensions have turned copper into a geopolitical currency, with prices now as much a function of trade policy as of physical supply. The $100/ton Yangshan premium and 136,000-ton inventory drain underscore that China’s demand remains robust enough to absorb current volatility—for now.

However, risks loom large. A U.S. tariff rollback could destabilize prices, while a failure to resolve trade disputes could trigger a demand collapse akin to 2008’s lagged downturn. Investors should pair long positions in copper with diversified exposure to African and South American mining projects (e.g., First Quantum Minerals (FMG)) to hedge against supply bottlenecks. China’s copper market is no longer just a commodity trade—it’s a high-stakes bet on the future of global trade itself.