Ventilator orders breathe life into Chinese copper demand

Singapore

COPPER demand in China is getting an unexpected lift from surging orders for ventilators in the global fight against the new coronavirus - the same factor that has subdued the traditional sources of copper demand this year.

Carmakers and air conditioner (AC) producers are among several manufacturers that have adjusted operations to fulfil the surging demand for the breathing-support machines for coronavirus patients, traders said on Thursday.

"I saw 20,000-set orders each from big US states and big European countries. Some carmakers and AC makers started to produce," said a trader based in China, estimating there is about 1-2 kg of copper in each ventilator set.

Copper premiums in bonded warehouses in Yangshan, or the money paid on top of international prices to import the red metal into China, traded at US$76 a tonne on Tuesday and Wednesday, the highest since Nov 4, 2019.

Improving demand as well as logistics jams overseas that have delayed shipments of copper cathodes, scrap and other raw materials, have all contributed to a tighter market, said another trader in China.

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"We are expecting premiums to go slightly higher later on, due to the logistics issue from South America and Africa," the trader said.

Lockdowns in Peru and South Africa as well as mining suspensions elsewhere in the copper belts of Africa and South America have threatened global copper supplies.

Traders also pointed to hope for a value-added tax cut in China that has lifted nearby copper futures contracts on the Shanghai Futures Exchange (ShFE) in recent days, making it profitable to import metals.

However, the broader outlook for copper demand remains subdued as the global economy struggles, and traders said the higher demand from ventilator production was not likely to have a long-term impact.

"Don't put too much expectation on the increased consumption from the medical sector. It is too small to cover other losses," said China copper demand analyst He Tianyu of CRU Group.

"Given the impact on overseas markets, it (the market) could be hard in the second and third quarters," he said, adding that copper demand for home appliances, cars, construction and machinery in China have been weaker than expected.

Both copper prices on the London Metal Exchange and ShFE have fallen about 17 per cent this year, the worst performers among base metals on their exchanges. REUTERS