China's copper industry sees slow recovery post-CNY holiday

China's 1# refined copper spot prices stood at Yuan 101,036/tonne on February 24, the first trading day after the Chinese New Year (CNY) holiday, rising by Yuan 1,092/tonne compared with February 13, according to Mysteel's assessment. Specifically, spot prices in Shanghai ranged between Yuan 100,490-102,050/tonne, averaging at Yuan 101,185/tonne. The 1# refined copper average spot premium in Shanghai was Yuan 255/tonne, surging by Yuan 275/tonne compared with the pre-holiday level.

Overseas, the London Metal Exchange (LME) copper three-month settlement price experienced limited changes during February 13-24, increasing slightly by $280/tonne or 2.18% and reaching $13,105/tonne on February 24. During the CNY break, a weakening U.S. dollar index, combined with rising LME inventory and weak demand in China, exerted downward pressure on copper prices, though purchases during price dips provided intermittent support. On February 20, the U.S. Supreme Court ruled that the Trump administration's broad tariff policies were unlawful, providing significant macroeconomic support and lifting sentiment in the base metals market. This, coupled with demand prospects supported by the post-holiday resumption in China, pushed copper prices back into an upward trajectory.

China's copper market was largely paused in the CNY holiday. Most downstream processors began their holidays early and ceased production, while smelters generally maintained steady production, resulting in ample supply and weak demand. With logistics constrained during the holiday, some smelters brought forward shipments to meet delivery needs, leading to a surge in China's post-holiday retail inventory to a near-decade peak. China's refined copper retail inventory reached 507,100 tonne on February 24, rising by 135,500 tonne or 36.46% compared with February 13, according to Mysteel's regular survey on warehouses in major Chinese regions representing about 96% of the national total. The inventory surge exceeded expectations, due to limited maintenance at smelters, and delayed contract rollover which prompted smelters to ship in advance.

Data Source: Mysteel

Post-holiday recovery was slow in China's copper industry. Copper prices continued their upward trend at elevated levels, while the resumption of operations among downstream copper processors and end-users was sluggish, leading to weak demand recovery. On February 24, the 2602 contract rolled over for delivery, with the near-month Contango spread remaining wide. Meanwhile, holders also exhibited cautious selling willingness, resulting in subdued trading sentiment on the first day after the CNY holiday. Mysteel's survey covering 56 refined copper trading enterprises (including traders, smelters, and downstream fabricators) in China indicated that the daily spot transaction volume totaled 13,800 tonnes on February 24, rising by 4,900 tonnes or 55.76% compared with the level before the CNY holiday. 

Looking ahead, macroeconomic uncertainties will remain high and are expected to continue exerting significant influence on copper prices. From a fundamental perspective, as the CNY holiday concludes, demand in China's copper market is expected to see a slow recovery. However, with both LME and China's copper inventories at elevated levels, the fundamental impact on copper prices in the near term may stay mixed. Copper prices are likely to continue fluctuating within a high range. Mysteel expects that short-term copper prices will trade between Yuan 96,000-105,000/tonne in China, and $12,500-13,500/tonne on the LME.

For more in-depth insights, long-term outlook, and comprehensive data on China's copper market, subscribe to Mysteel Copper Weekly, Mysteel Copper Monthly, and Mysteel Copper Database.

Written by Mingyuan Wang, wangmingyuan@mysteel.com 

Edited by Ruolan Chen, chenruolan@mysteel.com