The Iran War Ripple Effect: Global Price Slumps Ignite China’s Domestic Copper Market

The Chinese copper market has recently experienced its most significant weekly contraction in stockpiles for the current year, a shift primarily catalyzed by a sharp decline in metal valuations following geopolitical instability in the Middle East. According to data provided by Mysteel Global, national inventories of refined copper plummeted by 78,700 tons, settling at a total of 486,200 tons for the week concluding Monday. This trend is attributed to a substantial uptick in procurement by fabricators, who are reacting to a sudden influx of new industrial orders.

The valuation of copper on the London Metal Exchange has retreated by approximately 12% this month. This depreciation stems from broader economic anxieties regarding the conflict’s potential to trigger global inflation and decelerate growth. Domestically, the timing of this price dip coincided with the post-Lunar New Year resumption of industrial activity, further incentivizing manufacturers to replenish their stocks. For instance, Zhejiang Hailiang Co., a prominent producer of copper components, reported that its daily acquisition of refined metal has tripled relative to its previous annual average. This surge was triggered as domestic prices fell below the psychological threshold of 100,000 yuan per ton. Consequently, many processing facilities are operating at or near maximum capacity to meet delivery schedules extending into the coming month.

Simultaneously, the People’s Bank of China (PBOC) has maintained a conservative stance, leaving the burden of economic revitalization to fiscal policy. In 2025, the central bank implemented only a marginal 10-basis-point rate reduction, reflecting a cautious approach to monetary easing that aligns with the government’s modest growth targets. However, the trajectory of future interest rates remains ambiguous. While rising energy costs and AI-driven metal demand may end China’s period of deflation, there are concerns regarding the sustainability of this recovery.

Industrial profitability remains a critical concern, as a significant portion of Chinese firms—roughly 24% as of 2025—are currently operating at a loss. Economists suggest that while producer prices are rising due to increased commodity costs, factories may struggle to pass these expenses onto consumers. Projections from major financial institutions like Goldman Sachs indicate that surges in producer indices have a minimal impact on core consumer inflation, suggesting that industrial margins may continue to be squeezed by high input costs and stagnant retail demand.