Trafigura Group is aggressively purchasing large volumes of copper to supply Asia, where local supplies are dwindling. Over the past two weeks, the Singapore-based trading giant has approached multiple producers and traders in Asia to secure copper for November and December deliveries, according to sources familiar with the discussions. This buying spree is intensifying a regional supply crunch, particularly in China, where smelters are struggling with limited access to mined ores and scrap.
The surge in demand has triggered a bidding war among buyers, driving premiums for spot copper to record highs. In Shanghai, spot premiums have tripled in two weeks, reaching 2,615 yuan per ton, according to Shanghai Metals Market. Premiums for imported copper tracked by Fastmarkets Ltd. have also surged more than 40% to $195-210 per ton, the highest level since 2017. Similar increases are seen across Southeast Asia.
The supply tightness is evident in futures markets, where December-delivery contracts on the Shanghai Futures Exchange have surged above January prices, a condition known as backwardation. The front-month spread hit over 1,200 yuan per ton on Friday, the highest level since 2005. Deliverable stocks in SHFE warehouses now stand at 33,848 tons, nearing a multiyear low, which would cover China’s overall copper usage for less than a day.
Analysts attribute the supply crunch to a slowdown in refined production growth due to feedstock constraints. Amy Gower, a metals strategist at Morgan Stanley, noted that demand indicators are lackluster, pointing to supply issues as the primary cause of the market tightness. Meanwhile, disruptions in copper exports from the Democratic Republic of Congo, China’s largest source of refined copper, are further exacerbating the supply challenges.