The SHFE-LME copper arbitrage window has widened to roughly $350 per metric tonne, up from $200 in early May. After accounting for 13% VAT and logistics, the arbitrage is profitable for Chinese importers — and they are using it. Yangshan copper premiums, a proxy for import demand, rose to $62 per tonne on June 26, the highest in three weeks.
China imported an estimated 480,000 tonnes of refined copper in May 2026, up 8% year-over-year. The State Grid and renewable energy sectors remain the dominant demand drivers. Power grid investment in China was up roughly 12% through May compared to the same period in 2025. Solar and wind installations continue to absorb copper at a pace that is offsetting weakness in the property sector.
The physical market tightness is visible in the cathode premium. Domestic Chinese copper cathode is trading at $85-95 per tonne over SHFE futures, the highest since March. This is the signal that matters: end-users are paying up for physical metal, which means the futures selloff is a paper market event, not a reflection of physical oversupply.
The risk to this narrative is a broader China slowdown. If the stimulus measures announced in May fail to gain traction, copper demand could soften in H2. But for now, the data says demand is holding. China’s copper semis output — wire rod, tube, strip — was up roughly 5% year-over-year in May.
The widening SHFE-LME arbitrage tells buyers two things. First, Chinese physical demand is stronger than futures prices suggest — the premium is real money chasing real metal. Second, if the arb stays open, more copper will flow to China, tightening LME stocks further. For buyers sourcing on LME-linked contracts, the physical premium you pay may rise even if LME flat price declines. Budget for a higher premium in Q3.