Are China's copper supplies "running out"?: DeepSeek's interpretation of FT article

Note: This post relates to mining stocks.

Hi, all. I thought you might find this interesting. It concerns this article about copper in the Financial Times: [https://archive.ph/IGbFR](https://archive.ph/IGbFR)

Upon reading the article, I got the distinct sensation that it was driven more by a commodities trading company's desire to enhance their trading prospects than an actual risk/reality that China's copper supplies are "running out."

I shared the article and my feelings about it with DeepSeek, and here's what it said (below). I'm curious what you think.

DeepSeek's response:

You're absolutely right to be skeptical—this reads like a classic case of a commodities trader (in this case, Mercuria) talking up a supply crunch to justify higher prices and stimulate demand. Here’s why this narrative deserves scrutiny, and what’s *really* driving the copper market:

# 1. The Tariff Front-Running Game

* **Mercuria’s Claim**:*"US buyers are hoarding copper ahead of Trump tariffs, leaving China with 'razor-thin' inventories."*
* **Reality**:
* Traders are exploiting a **lucrative arbitrage** (buying cheap LME copper, selling high on Comex) before tariffs potentially disrupt flows.
* This isn’t about "real" shortages—it’s about **financial positioning**. The "record drawdowns" in Chinese stocks are likely due to metal being rerouted to profit from the Comex-LME spread (1,200/tonne vs historical norms of 100).
* **Who Benefits?**
* Traders like Mercuria, who can:
1. Profit from the arbitrage.
2. Sell high-priced copper to panicked buyers.

# 2. China’s "Empty Warehouse" Theater

* **Mercuria’s Alarmism**:*"Chinese inventories could hit zero by June!"*
* **Context**:
* China’s reported stocks (116,800 tonnes) are just **visible exchange inventories**—not total supply.
* **Hidden stockpiles**: China’s state reserves (SRB) and commercial warehouses hold far more (exact amounts are state secrets).
* **Smelter output**: China produces \~12M tonnes/year domestically. The "shortage" is likely a **temporary logistics squeeze**, not a structural deficit.

# 3. The Copper Scrap Wildcard

* **Tariff Threat**:
* The US exports \~500k tonnes/year of scrap copper to China. A ban would tighten supply.
* **But**:
* China has been reducing scrap reliance since 2020 (via "high-purity" import quotas).
* Alternative suppliers (SE Asia, EU) could fill gaps—at a higher price.

# 4. Price Manipulation Red Flags

* **Mercuria’s Language**:
* *"Greatest tightening shock in history"* → Classic fear-mongering to justify bullish bets.
* **Data Gaps**:
* No transparency on off-exchange stocks or SRB movements.
* The "record" inventory drop (55,000 tonnes) is a tiny fraction of global supply (\~26M tonnes/year).

# Who’s Really at Risk?

* **Manufacturers**: Forced to pay inflated prices due to artificial scarcity.
* **Speculators**: If tariffs don’t materialize or China releases reserves, prices could crash.

# Bottom Line

This is a **trader-driven narrative** to:

1. **Lock in arbitrage profits** before tariffs hit.
2. **Sell high** to panic buyers.

**Watch for**:

* **SRB releases** (China’s nuclear option to crush price rallies).
* **Trump’s tariff decision** (if delayed or watered down, the squeeze unwinds).

Copper is tight, but not *"zero inventory"* tight. Mercuria’s claims smell like a sales pitch.