The spot premium for copper in the top consumer According to economists and dealers. China’s metal prices may continue to rise over the coming months as a result of increased demand brought on by government stimulus.
The spot premium for refined copper increased from 50 yuan per tonne at the end of last year to 605 yuan ($85.36) per tonne on Thursday. It reached 825 yuan earlier this month. The highest level since November 2021.
The premium, which is paid on top of copper prices reported on exchanges. Provides a clue as to how the physical copper market in China is balance in terms of supply and demand.
In recent months, China has issued trillions of yuan worth of loans and spent heavily on infrastructure. Which consumes a lot of copper, in an effort to restore its economy. Which has been severely harm by COVID-19 limitations and a slowdown in the global economy.
China’s Demand for Refined Copper Increased.
The copper premium will still be at a relatively high level, according to He Tianyu, a copper analyst at consultancy CRU Group in China. “The Chinese commercial property market has been significantly hit especially for this year. But other sectors are looking bright,” he said.
As said by Tianyu, China’s refined copper demand increased by 5% year over year in the third quarter. And is expecte to reach a 9% year over year growth in October through December.
Average utilisation rates at copper wire-rod mills in China increased from 62% at the beginning of August to 70% today and from 64% to 67% at copper tube plants. Official data indicated September factory activity surprisingly returned to increase following two months of contraction in the manufacturing industry, another significant user of copper.
According to a metals dealer headquartered in China, “The Chinese market has received support from growing demand. Which contrasts with bad demand in non-Chinese markets and it would keep the import trade window open.”
The Yangshan premium, which measures Chinese demand for imported copper, increased to $108 per tonne on Thursday. Just short of a $112.50 mark reached on August 19. Which was the highest level since October of the previous year.
In the next months, it is anticipated that strong demand for copper from the infrastructure sector and limited supply in China would keep spot premiums high. According to government figures, China imported 2.37 million tonnes of refined copper in the first eight months of 2022, up 7.4% from the same period last year.
After China’s National Day holiday. Which lasts from October 1 to October 7, a Chinese manufacturer of copper tubes anticipated increased sales.
INVENTORY TIGHTNESS
The price is also aided by the low inventory. Metals in Shanghai Futures Exchange and China-based bonded warehouses were among the visible inventories in China. Which were at a record-low combined total of 118,697 tonnes. Together, the inventories at ShFE and the London Metal Exchange warehouses were 171,797 tonnes, or just 2.5 days’ worth of world use.
The metals trader stated, “Spot premium won’t be coming down any time soon as the supply in both domestic and international markets would stay tight.”
Due to power restrictions in the provinces of Zhejiang and Anhui, China’s copper cathode output fell short of expectations in August. According to COVID- 19 limitations and a limited supply of scrap. According to a report released on September 9 by state-funded research organisation Antaike.
Market tightness was also brought on by supply delays brought on by liquidity concerns at Maike. China’s largest copper importer, according to CRU’s He spoke.
A rising dollar, supported by monetary tightening in the United States, might make copper more expensive to import and weaken the import premium. According to another metals dealer, therefore the market has remained volatile.