Column: China’s commodity import trend driven by prices, not economy
China's imports of major commodities are often viewed through the prism of the performance of, and outlook for, the world's second-biggest economy.
Trafigura Group is delivering Russian copper into London Metal Exchange warehouses, according to people familiar with the matter, a move that’s likely to stoke a heated debate about whether the bourse should be taking tougher action against Moscow.
LME copper inventories rose by 10,850 tons, or 13%, in the past three days to a two-month high, with much of the increase coming in warehouses in Busan, South Korea and Kaohsiung, Taiwan. Some of that metal is Russian copper that’s been delivered by Trafigura, said the people, asking not to be identified as the matter isn’t public.
The LME declined to comment. A Trafigura spokesperson said: “We’re continuing to supply copper to our customers, which is a vital commodity needed for the energy transition.”
Russian metals have not, for the most part, been the target of western sanctions, and there’s no prohibition against delivering supplies from the nation to the LME.
But the possibility of large inflows has caused consternation in some parts of the copper industry. The LME’s copper committee, an advisory group representing the industry, voted earlier this month to recommend banning new deliveries of Russian metal. However, the exchange said it did not plan to take any action that went beyond government-imposed sanctions.
Trafigura, the world’s top copper trader, had earlier tried to sell the metal in China, traders said, which suggests the stocks predate Russia’s invasion of Ukraine. About 40,000 tons of refined copper has been shipped out of bonded warehouses in Shanghai in recent weeks, they said, suggesting that there could be further sizable deliveries on to the LME. Not all of that metal is Russian and not all of it has been shipped by Trafigura, they said.
Copper industry sentiment in China has been hit by the imposition of tough restrictions to try to control the spread of Covid-19. The commercial hub of Shanghai is in the midst of a phased lockdown.
Commodity-trading houses — long willing to operate in jurisdictions where others will not — have quietly continued buying and selling Russia’s raw materials, even as many of the world’s largest companies announce plans to leave the country following the invasion of Ukraine.
Trafigura, one of the leading traders of Russian oil, has said it “froze” investments in Russia and is reviewing its shareholding in state-controlled Rosneft PJSC’s Vostok Oil project. But it continues to buy Russian commodities under long-term contracts.
Trafigura’s rival Glencore Plc said this week that it wouldn’t seek any new business in Russia, but that it would keep buying commodities under its pre-existing contracts. Glencore said it won’t immediately sell its investments in the country.
(By Jack Farchy and Alfred Cang)
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