MYSTEEL: Delayed peak seen in China's retail copper stocks after CNY

Retail stocks of refined copper throughout China are expected to reach a peak of between 37-40 days after this year's nine-day Chinese New Year (CNY) holiday that commences on February 15, the results of a recent Mysteel survey suggest. This year's CNY celebrations will formally end on February 23, later than in previous years, causing retail stocks to peak later as well. Moreover, the peak is expected to be larger than the usual level of about 33 days seen previously, Mysteel data shows, due to a high base of comparison and healthy direct shipments to end-user enterprises.

During the CNY holiday, most Chinese copper smelters will maintain normal production, while end-users generally shut their businesses so staff can enjoy the break. Holiday traffic congestion on most highways also hampers freight movement. As a result, refined copper inventories generally accumulate over the break due to stable supply and weak consumption, while recovering logistics networks immediately after China returns to work generally lead to concentrated warehouse arrivals.

Retail inventory calculated by Mysteel covers warehouses in major Chinese regions including East China's Shanghai, Southern China's Guangdong, Southwest China's Chongqing, North China's Tianjin, and more, representing about 96% of the national total. It also includes delivery warehouse stock, but excludes in-plant finished goods, fabricators' raw material inventory, and spot port inventory.

On February 9, Mysteel assessed the nationwide retail stock total at 341,200 tonnes, a near 20% rise from early-January and maintaining the high in comparison with the same period in previous years. Moreover, survey respondents suggested that the inventories would continue growing and reach a peak of perhaps 37-40 days by around early April.

China's refined copper retail inventory trends (2024~2026):

Source: Mysteel

Upstream and downstream see diverging holiday arrangements

Regarding holiday work plans for this year's CNY break, the results of an earlier Mysteel survey released on February 5 indicated normal operations at most smelters but generally constrained production at downstream enterprises producing copper semis. The survey canvassed 20 copper smelters, 73 copper rod producers, 16 copper plate/strip producers, 12 copper foil producers, 17 copper tube producers, and 20 copper bar producers in China's major markets such as Shanghai, Guangdong, Zhejiang, Jiangxi, Anhui, and Hubei.

According to the survey findings, 25% of the sampled smelters said they would cut production "slightly" during this year's holiday, while about 84% of copper semis producers will stop or reduce output, constraining their need for refined copper and keeping retail stocks high nationwide.

In addition, the willingness of copper semis manufacturers to procure refined copper for production after China reopens for business from the break stayed weaker compared with previous years, as end-users are balking at having to pay higher prices for copper products and so are reducing orders. "Currently, the orders we have in hand for our copper rods are markedly lower than in previous years," one rod producer in east China's Zhejiang admitted.

On February 11, Mysteel assessed the spot price of 1# copper at Yuan 101,279/tonne ($14,656.87/t) in China, higher by over 30% from the same period last year.

Logistics industry extends its break

According to market participants, this year's CNY holiday may also see firms involved in logistics close their offices and freight yards for longer – a factor that will slow refined copper shipments around CNY and delay the peaking of retail stocks.

Smelters in North and Northeast China markets, such as in Tianjin and Liaoning, reported constrained transportation since February 4, noting that post-holiday logistics resumption may also be slow, especially for cross-province transportation. The country's East and South China markets saw a similar trend, and smelters have started arranging shipment schedules in advance to limit any impact on refined copper deliveries.

Constrained by limited available transportation, only two of the 20 surveyed copper smelters will maintain normal shipments during the holiday, with others generally planning to reduce or stop shipments from February 15 and resume after February 20. "Shipments may stop for a few days during the holiday (as) it's hard to book trucks now, " one smelter official in South China's Jiangxi told Mysteel.

Meanwhile, eight smelters reported that they will prioritize direct shipments to downstream enterprises around the holiday, while only five indicated a preference to deliver to retail warehouses, likely leading to a moderate inventory accumulation after the break.

Overall, refined copper retail inventories in China are projected to mount after this year's CNY celebrations and stay at a high level, with a postponed peak and limited growth, due to weak downstream demand, constrained logistics, as well as the low priority suppliers are placing on shipping to warehouses. Mysteel estimates that the inventory peak may reach 440,000-450,000 tonnes around March 30-April 3 and will likely ease later.

The delayed inventory peak and relatively high stock level will have downward pressure on China's copper prices after the CNY break, with 31% of smelters in Mysteel's survey expecting prices to fluctuate at an elevated level. Additionally, smelters are likely to increase refined copper exports going forward, to alleviate domestic inventory pressure.

Written by Mingyuan Wang, wangmingyuan@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com