Chinese copper glut grows due to price surge and weak demand, impacting manufacturers and global stocks

From Financial Times: 2024-06-18 21:33:52

Roula Khalaf offers free access to the Editor’s Digest with her top picks. Meanwhile, China has accumulated the largest copper backlog in four years due to a price surge and weak demand. Copper inventories in Shanghai hit 330,000 tonnes, increasing pressure on manufacturers amidst a real estate downturn.

The excess metal can’t be consumed as wire and cable industries face challenges in China. With copper reaching a record high of $11,000 per tonne last month, the downturn reflects weakness in manufacturing and credit activities. Beijing refrains from stimulating household consumption directly, impacting copper prices.

Despite a 13% decrease in copper prices to $9,600 per tonne since the peak, Chinese demand remains lackluster. The slowdown persists after the Lunar New Year, hinting at an unusually prolonged inventory build-up this year. Global copper stocks remain dangerously low, raising concerns about potential price surges.

Global copper inventories face depletion, facing threats from increased smelter capacities in China, Indonesia, India, and the Democratic Republic of Congo. The closure of a major mine in Panama and production cuts had initially raised concerns about supply shortages. However, the physical scarcity did not materialize due to increased production in the DRC.

Amidst falling prices, the build-up of excess copper in China reveals the impact of unchanged smelter output. Analysts remain divided on the future price movement, with some anticipating a rally in the second half due to pent-up demand. Yet, others warn of further declines if funds turn bearish on copper, possibly dragging prices down to $9,000 per tonne.



Read more at Financial Times: Chinese copper glut grows in sign of sluggish economy