Chinese copper demand revs up, but banking rout could cap prices
By Mai Nguyen and Siyi Liu
BEIJING/HANOI, March 17 (Reuters) – China’s copper consumption is rebounding firmly and will likely stay strong in the next quarter, buoyed by a seasonal peak in demand and Buy Casino Script easing COVID-19 restrictions in the world’s biggest consumer of the metal.
The long-awaited rebound is providing much-needed support for copper prices, battered by a widening banking crisis in the United States and liquidity issues at Swiss lender Credit Suisse .
“Copper consumption has increased quite a lot in the past two weeks. The strong demand will last… at least in the whole of the second quarter,” said He Tianyu, a China-based analyst at CRU Group.
The Yangshan copper premium <SMM-CUYP-CN> more than doubled in a week to $47.50 a tonne on Thursday, near a three-month high, indicating improving demand for imported copper in China.
“Large scale copper wire-rod producers’ operating rate is already at 85%-90%. Some producers are at full capacity,” He added.
China’s housing completion by areas rebounded 8% year-on-year in January and February from a 15% drop in the whole of 2022, National Bureau of Statistics data showed.
The recovery in the property sector is boosting copper cable orders, while copper tube makers are also running strong, He said.
“March to June is the traditional demand season as air conditioning producers – the main consumer of copper tubes – are ramping up production to get ready for more orders in the hot summer season,” a Chinese copper tube producer said.
“We are running at 95% of operation rate this month, up from 75% in February,” the producer added.
Copper stocks in warehouses tracked by the Shanghai Futures Exchange <CU-STX-SGH> dropped 28% in just three weeks to 182,341 tonnes, and CRU’s He said supply could be tight in coming weeks due to a lack of scrap availability caused by falling prices.
Chinese state-backed research house Antaike predicted demand for refined copper in China, which accounts for about half of global demand, could grow 2.7% this year to 13.68 million tonnes.
Similarly, CRU saw refined copper consumption in China rising 2.8% this year to 13.98 million tonnes.Counting scrap, total copper demand in China could grow 3.2% this year to 16.13 million tonnes, against a 1.4% expansion in 2022.
Main growth drivers will likely come from the property sector, electric vehicle (EV) manufacturing, renewable energy and infrastructure, CRU’s He said.
China’s State Grid pledged record-high investment of more than $70 billion in power grid construction this year, state media reported, and China’s manufacturing activity expanded at the fastest pace in more than a decade in February.
SHAKY MACRO ENVIRONMENT
Despite upbeat copper fundamentals, prices still face pressure from ever volatile macroeconomic conditions.
Citi analysts see London Metal Exchange copper prices falling to $8,000 a tonne in a few months as investors likely further unwind positions on potentially ongoing concerns in the U.S.banking sector.
COMEX copper speculators have turned net short on copper, having been taking net long positions for four months, exchange data showed.
Antaike warned of weaker copper demand growth from the solar and EV sectors this year, while uncertainty still clouded the Chinese property sector.
Nonetheless any price drop represents a long-term buying opportunity, as copper is the “only liquid commodity in the major commodity futures indices whose consumption is key to driving decarbonisation”, Citi analysts said in a note.
They expect prices to hit $9,000 a tonne in 6-12 months.
(Reporting by Mai Nguyen in Hanoi and Siyi Liu in Beijing; Editing by Jan Harvey)