Chinese copper demand sags in busy season after prices surge

[BEIJING] As the busy period for Chinese manufacturing draws to a close, copper consumption has largely disappointed, with run rates at fabricators plumbing multiyear lows for the season.

It’s another instance of how quickly demand in the world’s biggest consumer can evaporate when the market rises too sharply. International prices surged to a record at the end of last month following mine disruptions around the world.

While even bigger gains are predicted based on the metal’s burgeoning green applications, Chinese usage remains heavily weighted to construction and a property sector mired in crisis. A slump in government spending, meanwhile, has kicked away another prop to demand.

Industrial activity in China’s highly seasonal economy usually picks up in the autumn, lifting orders for the fabricators that shape metal into wire, tubes and foil. That’s hardly happened this year, and Chinese smelters have instead turned to exports to soak up supply.

“Demand is a total mess, partly due to copper prices being too high,” said Nicole Ni, vice-general manager at Eagle Metal International, a trading company that sells copper to fabricators. Some customers are not making much money and have little incentive to produce as annual targets have already been met, she said.

Rod makers account for about half the country’s copper products, delivering wire for electricity transmission. They cut runs to 61 per cent of capacity last month, according to Shanghai Metals Market data. That’s the lowest since February. In October last year, it was 69 per cent.

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Fabricators producing copper tubes for plumbing and air conditioners reduced operating rates to 62 per cent, while runs for plates and strip used in electronics and auto parts fell to 65 per cent. All three segments are at or close to the lowest levels for October over about a decade of data collection.

One bright spot was copper foil output, used in batteries and circuits, although it only accounts for about 5 per cent of the market. Runs rose to 84 per cent in October, the best month in over two years, as demand surges for large-scale battery storage.

Batteries are one of the new engines of China’s industrial growth strategy alongside solar and electric vehicles. The government recently unveiled measures aimed at scaling up capacity, boosting demand for related commodities, including lithium. BLOOMBERG