Supply-demand dynamics recover in China's copper market

China's 1# refined copper spot price stood at Yuan 100,723/tonne on March 12, dropping by Yuan 563/tonne compared with the previous trading day, according to Mysteel's assessment. Specifically, spot prices in Shanghai ranged between Yuan 100,390-101,080/tonne, averaging at Yuan 100,685/tonne. The 1# refined copper average spot premium in Shanghai was Yuan 60/tonne, rising by Yuan 30/tonne day on day. Escalating geopolitical conflicts heightened inflation concerns, exerting downward pressure on copper prices. In China's refined copper market, with the approaching contract rollover and downstream restocking demand ahead of the weekend, suppliers held firm on offers, supporting a continued recovery in spot premiums.

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 28,000 tonnes on March 12, dropping further by 5,000 tonnes or 15.19% day on day. High refined copper spot premiums dampened downstream enterprises' purchasing willingness, leading to a continued decrease in daily transactions despite the price decline.

Regarding inventory, China's refined copper retail inventory stood at 577,500 tonnes on March 12, falling by 7,100 tonnes week on week, marking the first decline after the Chinese New Year holiday. Downstream procurement recovered amid price declines this week, boosting deliveries from warehouses. Additionally, arrivals from domestic smelters also dropped, jointly pushing overall retail inventory lower. Overseas, LME copper inventory increased further by 30,150 tonnes week on week to 312,350 tonnes on March 12. The price spread between London Metal Exchange (LME) three-month copper and COMEX copper narrowed on March 12, likely supporting the continuous inventory increase at LME warehouses.

China's copper semis markets have gradually shifted into its peak consumption season. Mysteel's 31 Chinese copper rod sample manufacturers with a total annual capacity of 6.01 million tonnes and 6 sample traders reported that order volumes increased by 4,000 tonnes or 50.69% day on day, reaching 11,900 tonnes on March 12, with refined copper rod transactions growing by 4,200 tonnes or 70.49% to 10,200 tonnes, but secondary decreasing by 200 tonnes or 13.23% to 1,600 tonnes. The decline in copper prices narrowed the refined-secondary copper rod price spread, lifting refined copper rod order volumes. The secondary copper rod market, however, remained constrained by tight supply of both raw materials and finished products, limiting order intake. Meanwhile, trading sentiment in the copper plate/strip, copper tube, and copper bar markets saw improvement.  

Overall, China's refined copper supply has been relatively stable, with expectations of a further recovery in the short term. The demand side is gradually picking up, and retail inventory has begun to decline. Looking ahead, while macroeconomic uncertainties will continue to trigger price volatility, fundamentals are expected to provide sustained support to China's copper price floor.

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Written by Mingyuan Wang, wangmingyuan@mysteel.com 

Edited by Ruolan Chen, chenruolan@mysteel.com