Global supply is expected to continue to be impacted by ageing assets, declining ore grades, limited sector reinvestment, the diminished project pipeline and some threat of mine disruption

London Metal Exchange copper inventories were slashed in half from the previous day to just under 40,000 tonnes, the lowest since August 2005, according to Reuters calculations. Global stocks of the bellwether metal are now nearly 395,000 tonnes below the same point last year.

That is despite a massive jump in imports by China, which consumes half the world’s copper.

Shipments of unwrought copper came in at 479,000 tonnes in January, up 14% from December. At the current pace annual imports of refined copper are on course to top 2018’s record 5.3m tonnes.

Imports of copper concentrate surged 17% from a year ago to 1.9m tonnes last month. January cargoes were the second-highest monthly total on record and on an annualized basis concentrate imports could exceed 22m tonnes in 2019, beating the record set last year of 19.7m tonnes.

Despite the volume of concentrate entering the Chinese market, treatment charges (TCs/RCs) paid by miners to refiners have been hovering at five-year lows.

The world’s number three copper miner, Glencore, has a unique view into the market thanks to its metals trading arm, and the Swiss-based giant’s outlook accompanying its 2018 results were particularly bullish on the longer term prospects:

Looking ahead, global supply is expected to continue to be impacted by ageing assets, declining ore grades, limited sector reinvestment, the diminished project pipeline and some threat of mine disruption. Chinese scrap import regulations are expected to result in the increased import of cathodes and concentrates, effectively diverting such from other markets with, as yet, only a marginal increase in scrap conversion/replacement outside China. Given this dynamic and a healthy expected demand outlook, the copper market could enter into a period of substantial and sustained supply deficits. In the longer term, copper markets are expected to continue to experience solid growth rates, driven by population growth and rising living standards in emerging economies. In addition, the energy and mobility evolution, from power generation and distribution to energy storage and vehicles, is anticipated to become an increasingly important sector for copper.