Recent developments in China’s import landscape and ambitious infrastructure projects are sending ripples through global commodity markets, particularly impacting copper, rare earths, and iron ore.
While some shifts signal potential supply concerns, others point to robust demand, prompting analysts to assess the long-term implications.
Copper: scrap imports plummet, production remains stable
The global copper market recently saw speculation that declining Chinese copper scrap imports from the US could trigger a raw material shortage in China and subsequently affect production.
According to Chinese customs authorities, scrap imports in June hit a 21-year low, largely attributed to announced US tariffs on copper imports.
This has led to speculation that US companies might be stockpiling raw materials due to tariff uncertainties.
However, Thu Lan Nguyen, head of FX and commodity research at Commerzbank AG, offers a more tempered view.
While the lower US copper scrap exports could be a sign of stockpiling by US companies, US production capacities are too low to cause a raw material shortage outside the US compared to the corresponding capacities in China, which produces about 13 times as much copper, according to USGS data.
She further emphasises that China’s recent robust copper ore imports suggest that Chinese smelters are likely to remain well supplied.
“We therefore see the slump in copper scrap imports from the US as less of a problem for the time being,” Nguyen concludes, indicating that the immediate impact on global copper supply may be less severe than initially feared.
Rare earth exports see a resurgence after licensing delays
China’s rare earth export market, a critical component for various high-tech industries, experienced significant disruptions in April and May following the introduction of a new licensing procedure.
This mainly affected permanent magnets containing heavy rare earths, which constitute the majority of China’s rare earth exports.
Exporters faced a two-month waiting period for licenses, causing a slump in shipments.
However, June brought a notable recovery. Exports of permanent magnets rose by a substantial 157% compared to May, reaching 3,187 tons.
Despite this impressive monthly growth, the figure still represents a year-on-year decline of over 38% and marks the lowest export volume since February 2021, excluding the immediate post-licensing months.
Volkmar Baur, FX analyst at Commerzbank AG, commented on the trend, noted:
The export trend for the US and Germany is similar. While the percentage increases compared to the previous month are in the triple-digit range, export volumes to Germany in June were still 25% below the previous year’s level and in the USA more than 50% below.
Baur highlights Thailand as an outlier, where permanent magnet sales in June surpassed all previous records, reaching over 200 tonnes.
This suggests that while overall recovery is underway, regional demand dynamics are varied.
Iron Ore: Himalayan dam project fuels price surge
The iron ore market witnessed a significant price surge following the announcement by Chinese Premier Li Qiang that construction work on the world’s largest dam project in the Himalayas, “Project Hope,” would commence.
This ambitious project, estimated to cost $170 billion, involves building a hydroelectric power plant with a colossal capacity of 300 billion kilowatt-hours per year across five sections on the Yarlung Tsangpo River.
This capacity is three times that of China’s Three Gorges Dam, leading to expectations of massive demand for construction materials, including steel.
The iron ore price reacted positively, climbing by 2.7% on Monday and reaching over $105 per ton on the Singapore stock exchange by Tuesday, the highest level since October 2024.
Despite the initial market enthusiasm, Volkmar Baur expresses caution.
“While the launch of this project certainly sends a positive signal, we consider the market reaction to be exaggerated,” said Baur.
He points out the extended construction timeline, citing the Three Gorges Dam’s nearly 18-year completion period.
“Furthermore, although the project is very large as a single project, according to the National Bureau of Statistics, fixed asset investments of over CNY 50 trillion were made in China last year. CNY 1.8 trillion of this went into the expansion of power plants and the electricity grid.”
He contextualised the project within China’s broader infrastructure spending. He also notes that the project’s commencement was announced in December last year.
Baur concluded:
Taken on its own, the project therefore seems large, but in the overall context of Chinese infrastructure investment, it is only a small part of a larger whole.
Baur further suggested that while the project is substantial, its impact on the vast Chinese iron ore demand may be more gradual than the initial price spike indicates.
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