China copper inventories near 4-yr high as supply swamps virus-hit demand

Credit: Shanghai Futures Exchange

Shanghai Futures Exchange copper inventories rose another 10% in the past week to their highest in almost four years amid signs China’s production is holding up even as demand struggles to recover from the impact of the coronavirus.

Chinese steel stocks, meanwhile, remain at record highs, although the pace of the build has slowed.

Inventories of copper climbed by 34,959 tonnes from the previous week to 380,065 tonnes, the exchange said on Friday. That’s the most since March 25, 2016.

More than 58% of property and infrastructure construction projects in China – a key source of copper consumption – had resumed as of last week

The boost comes after Chinese research house Antaike said February copper output in its smelter survey was flat from January at 656,000 tonnes, much higher than expected, and as key metal consuming sectors are slow to return to work.

“Various companies have increased their sales of sulphuric acid,” Antaike said, referring to the byproduct of smelting that copper producers were unable to sell after the virus outbreak, leaving them short of storage space and facing production cuts.

Furthermore, copper concentrate treatment charges, a key source of smelter revenue, have jumped 20% since the end of 2019. Charges above $70 a tonne have eased the pressure on smelters, said Antaike, which is forecasting output of around 690,000 tonnes in March.

ShFE copper inventories have now clocked straight weekly gains since Jan. 10, although the bourse did not report numbers for the extended Lunar New Year holiday in late January and early February. Zinc and aluminium stocks are on an even longer rising streak stretching back to Dec. 27.

Zinc stocks rose 4.6% in the past week to their highest since April 2017, while aluminium stocks added a hefty 8.4% to more than half a million tonnes, the most since May 2019.

More than 58% of property and infrastructure construction projects in China – a key source of copper consumption – had resumed as of last week but still face staff shortages, the Ministry of Housing and Urban-Rural Development said.

The sector also accounts for more than half of China’s steel demand but one trader said the number of firms back at work “doesn’t mean there’s a high capacity utilisation rate” and noted some downstream production lines remain closed.

Steel inventories in China – including products held by traders – hit a record 38.91 million tonnes on Thursday, although the weekly rise was the shallowest since Dec. 20, according to data compiled by Mysteel. Inventories at mills dropped by 600,000 tonnes to 12.9 million tonnes.

China’s car-manufacturing industry – a big user of steel, copper and aluminium – is still struggling, especially in coronavirus epicentre Wuhan, which accounts for almost 10% of vehicle output and is home to hundreds of auto parts suppliers. Passenger car production in China plunged 86.4% year-on-year in February.

Stocks of hot-rolled steel, used in cars and home appliances climbed to a near five-year high of 4.13 million tonnes, according to Mysteel.

(By Min Zhang, Tom Daly and Mai Nguyen; Editing by Susan Fenton and Jane Merriman)

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