Chinese copper purchasers are lengthening their Lunar New Year holiday as prices hover near record levels, dampening industrial demand for the red metal. Shanghai Wooray Metals’ General Manager Wang Wei explained that the recent surge has raised financing pressures for copper pipe and rod manufacturers and shrunk their order volumes.
Although the holiday officially starts next Monday and runs through February 23rd, Wang noted that the slowdown in demand is expected to set in fully this week.
Buyers in China, the largest consumer of physical copper globally, have been reluctant to follow last year’s price rally amid a weakening domestic economy. Longer factory shutdowns during the holiday are expected to weigh further on market momentum, after investor-driven buying pushed the red metal’s prices to new highs late last month.
A recent survey shows that several copper rod manufacturers in China suspended output as early as January 25th and are not expected to resume operations until March. The survey covered plants with a combined capacity of 3.3 million tons, which is roughly 20% of the nation’s total. Copper rod producers make up about half of the country’s copper product sector, supplying wire used in power transmission.
It also found that makers of copper plate, strip, and pipe, all of which are materials used in applications ranging from plumbing systems to circuit boards and solar panels, could postpone production due to weak order flows.
The reduced activity reinforces concerns that investor enthusiasm, driven by copper’s importance in renewable energy and computing technologies and expectations of tighter supply, may be outpacing actual consumption. Still, manufacturers and fabricators returned to the market last week when prices briefly dipped below 100,000 yuan ($14,464).
In a research note, Zijin Tianfeng analyst Zhou Xiao’ou explains that this level appears to represent a threshold buyers are comfortable with. She added that if prices remain under that threshold when industrial buyers return following the Lunar New Year break, the rebound in demand could be substantial.
Guoyuan Futures analyst Fan Rui noted that declining inventories among fabricators may also create scope for renewed buying. Additional support could come from accelerated orders by battery and solar panel manufacturers, with export tax rebates set to be scrapped from April 1st.
Despite signs of softer Chinese demand, copper futures on the London Metal Exchange climbed 1.4% to close at $13,176.50 per ton at the start of the week, suggesting investors remain focused on longer-term supply risks. As things stand, mineral development companies like Numa Numa Resources, Inc. focused on copper mine development are still well positioned to continue seeing heightened investor interest.
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