Since the second quarter of 2022, China domestic refined copper social inventory fell until the beginning of September. Mysteel data shows that Feburary refined copper social inventory reached highest of 220kt and decreased to 50.7kt on August 31. The decline was 169.3kt (-73.9%).
There are four reasons for continuous social inventory decline: First. Since the beginning of Q2, domestic copper consumption broke out due to coronavirus disruption in Q1 ended. Second, domestic refineries production was lower than expectation on the impact of power supply tightness, Third, imported copper profitability depressed and premium in other markets was higher than China, which attracted copper flow to there. Fourth, domestic large copper import enterprise was under capital risk, which restrained capability to import.
Entering into September, copper social inventory began to increase while bonded inventory maintained falling. Arrival to port and clearance volume significantly recovered. Mysteel investigated that within the first week of September, clearance volume of Shanghai port reached 70-80kt, of which, 60% came from ships arrival and 40% came from bonded warehouse.
Since June 2022, bonded warehouse inventory kept falling for three reasons. First, domestic copper demand recovered in June and premium rose to impose arbitrage window open. On the other hand, global refined copper supply appeared tightness in Q2 due to high European energy price and coronavirus interruption in South America. Finally, copper demand in neighbor courtiers increased to attract imported copper for higher premium.
Overall, with imported copper arrival in September and domestic output recovered from power supply issue, plus 520kt new capacity (120-320kt actual running capacity) will commission in September, Mysteel expects refined copper production to reach over 900kt and social inventory to increase.
Data Source: Mysteel
Data Source: Mysteel
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