Copper price at risk of pullback as buying in China stalls after rally

Mechanical workers operate a machine for winding copper wire. Stock image.

Copper’s powerful rally close to $10,000 a ton is facing a test as buyers in China, the world’s biggest market, balk at prices near their highest in two years.

The metal has surged in recent weeks on investor optimism over a recovery in global manufacturing and the prospect of tightening mine supplies. But skeptics have pointed to weakness in China — including what they say is a growing reluctance among the country’s copper fabricators to accept higher levels.

Fabricators have struggled to pass on higher costs to their customers, forcing them to rein in purchases since March, Wang Wei, general manager at major copper trader Shanghai Wooray Metals Group Co., said at an industry conference in Hangzhou on Tuesday.

Fabricators buy refined copper and turn it into more specialized products, and they are typically very price-sensitive — especially at times of uncertain demand. Prices have detached from fundamentals and are due a pullback, Wang, whose company sells metal to fabricators, said in an interview.

Copper almost breached $10,000 a ton on the London Metal Exchange at the start of this week, capping a surge in April that’s emboldened bulls who predict big long-term gains. There’s already been a dip since then, with the metal closing lower on Monday, and falling as much as 1.8% on Tuesday.

“Demand from fabricators is very weak after the recent rally,” Gu Yan, director of copper at Citic Metal Co., said at the conference, citing swelling Chinese stockpiles. “There is only a bit of demand from the renewable-energy sector, not much from any other markets. Fabricators are all waiting for a price correction to get a breather.”

Other market data point to softer demand. The Yangshan copper premium, paid on top of exchange prices for imported material, has slumped close to zero, while domestic supplies are at their widest discount to futures prices since 2022, a structure that indicates oversupply. Chinese smelters are also exporting refined copper to the tighter overseas market.

“To forecast whether the bull market can continue, we focus more on whether processors can pass on the rising prices to consumers,” Wang said. “Fabricators have difficulties in that cash flow is another big problem.”

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