US-China Copper Race Lifts Price Expectations; Middle East Crude Freight Remains 7x Year-Ago Levels
nashnova research
The US and China are drawing refined copper from the same shrinking pool, pushing the 2026 supply deficit to 950,000 tonnes. Middle East crude exports have recovered to 94% of pre-war levels, yet freight rates sit at seven times what they were a year ago — supply structure, not demand, is repricing commodities.
Why are the US and China racing for copper at the same time?
The US had built up roughly 750,000 tonnes of above-normal inventory by September, front-running tariff deadlines.
In China, tighter scrap-copper tax compliance slashed recycled copper-rod output by 54% year-on-year (about 660,000 tonnes lost). Refined copper-rod output rose roughly 305,000 tonnes to fill the gap.
This means → most of China's extra refined-copper demand is feedstock substitution, not stronger end-use consumption. Both countries are scooping from the same pool — and the pool is running dry.
How high can copper prices go?
With mine supply also weaker than expected, the ex-US supply deficit forecast rises to roughly 950,000 tonnes in 2026 and 220,000 tonnes in 2027.
Price targets move up accordingly: $14,700/tonne by end-2026 (from $13,735) and a $15,400/tonne 2027 average (from $13,800).
Key downside risks: weaker growth, investor long liquidation, or falling tariff expectations slowing US imports. In plain terms = the bull case rests on the supply gap; if demand softens, the retreat could be sharp.
Middle East crude exports are back — so why are freight rates still so high?
For the week ending October 18, Middle East crude exports hit roughly 17 million barrels per day, about 94% of pre-war normal. But refined-product flows have recovered only about half — a clear divergence.
Global average crude freight has jumped from roughly $3 per barrel a year ago to over $20; Middle East routes top $35.
In plain terms = the "volume" is back, but freight embeds war-risk premium (~$7), ship-to-ship transfer costs (~$4), bunker costs (~$4), and rerouting inefficiency (~$3). Volume recovery does not equal cost recovery.
How does elevated freight ripple downstream?
VLCCs doing ship-to-ship transfers in the Gulf of Oman average about 23-day round trips, versus roughly 10 days for a direct Strait of Hormuz transit — the efficiency loss alone is a persistent cost.
This means → higher freight widens origin-price spreads and squeezes refinery margins. If refiners cut runs in response, that supports refined-product prices from the other side.
Whether refined-product supply recovery can accelerate is the key variable for judging if elevated Middle East freight persists.
Central banks are hoarding gold — and now rethinking where to store it?
Central banks bought an estimated 79 tonnes in August, far above the pre-2022 monthly average of 17 tonnes. The seasonally adjusted three-month average sits at roughly 85 tonnes per month, with China a major contributor.
In August, foreign central-bank gold held at the New York Fed fell 40 tonnes; gold held at the Bank of England rose 46 tonnes.
This reflects a reserve-security debate that has shifted from "whether to hold gold" to "where to keep it" — geopolitical trust is reshaping the physical geography of central-bank reserves.
Aluminium, iron ore, gas, coal — what other signals stand out?
Aluminium: combined Chinese ingot and billet inventory at 897,000 tonnes, down 11% month-on-month and 5% year-on-year. But billet stocks are still up 8% YoY — pressure varies by product.
Iron ore: China imported roughly 151 million tonnes from non-traditional sources (outside Australia, Brazil, South Africa) in the first nine months, up 16% YoY. A $10 swing in annual average price could shift non-traditional supply by 13–15 million tonnes.
Natural gas: the December 2026 TTF contract sits at roughly €88/MWh, implying about a 51% probability that Hormuz LNG flows this winter reach only 25% of normal. If transit volumes keep recovering, the ~€18 low-supply risk premium has room to deflate.
Coal: power-plant coal inventories across 17 inland provinces rose to 84.1 million tonnes (up 13.2% MoM), but still 10.5% below last year. Thermal coal edged up; coking coal pit-mouth prices fell 3.5% week-on-week — the two are not moving in lockstep.
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