China’s Copper Demand to Cool as Buyers Shut for Longer Holiday

i89[13k9mkkej484hb36d0k4_media_dl_1.png SHFE

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(Bloomberg) — Chinese copper buyers are extending their break over the Lunar New Year as near-record prices chill industrial demand for the metal.

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The rally has “increased financial costs at copper rod and pipe producers, and reduced their order books,” said Wang Wei, general manager of Shanghai Wooray Metals Group Co., which sells refined metal to the fabricators that shape copper for factories. The Chinese holiday begins next Monday and officially ends on Feb. 23, but the lull in demand will fully take hold this week, he said. 

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The world’s biggest buyers of physical metal have resisted the run-up in prices over the past year due to a slowing Chinese economy. Extended shutdowns over the holiday period are likely to put a bigger dent in the market’s momentum, which saw investors drive copper to new heights at the end of last month. 

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Some copper rod producers in heavily industrialized southern China halted production as early as Jan. 25 and won’t restart until March, according to a survey of plants from consultancy Mysteel Global, which covered 3.3 million tons — about one-fifth — of the country’s capacity. Rod makers account for around half of China’s copper products, delivering wire for electricity transmission.

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Producers of pipe, strip and plate — used in plumbing to circuit boards and solar panels — may also delay operations because of limited orders, according to the survey. The slowdown lends support to the view that speculative interest in copper, based on tightening supply and its critical roles in new energy and computing, has run ahead of real-world demand.

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Fabricators and manufacturers did step in with purchases last week when prices briefly slid below 100,000 yuan ($14,400) a ton, suggesting it’s a “psychological price level that’s acceptable,” Zhou Xiao’ou, an analyst with Zijin Tianfeng Futures Co., said in a note. 

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If prices are below that level when industrial buyers reemerge after the Lunar New Year, the impact on demand could be significant, she said. 

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Inventory depletion at fabricators would also leave room for more purchases, said Fan Rui, an analyst with Guoyuan Futures Co. Other potential bright spots include front-loaded purchases from solar and battery makers, which will lose export tax rebates from April 1.

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Copper futures in Shanghai rose 1.8% to 101,940 yuan a ton at 10:23 a.m. In London, they were 0.7% higher to $13,085.50 a ton. 

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On the Wire

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This Week’s Diary

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(All times Beijing)

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Monday, Feb. 9:

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Tuesday, Feb. 10:

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Wednesday, Feb. 11:

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Thursday, Feb. 12:

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Friday, Feb. 13:

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