SHANGHAI, Mar. 14 (SMM) –
According to China Customs, China’s imports of scrap copper were 250 kt in February, down 31.48% MoM, and down 9.63% YoY. China’s imports of scrap copper hit their lowest level since March 2009 and were down due to the following factors. First, the Chinese New Year holiday reduced the number of working days in February. Most importers of scrap copper brought forward customs clearances to January, reducing customs clearances in February. Second, LME copper prices hovered at high levels during December and January, keeping demand low, so importers generally chose to reduce imports to minimize financial risks.
Following Chinese New Year, demand recovery in domestic copper markets failed to meet market expectations. Downstream producers generally stood on the sidelines and were purchasing raw materials cautiously. In addition, importers were not enthusiastic since the price ratio was unchanged. In this context, SMM believes China’s imports of scrap copper in March are expected to be around 350 kt.
Unwrought Copper and Copper Semis
According to China Customs, China’s imports of unwrought copper and copper semis were 235.5 kt in February, a drop of 128.8 kt from January’s 364.2 kt. Imports were down 35.35% MoM and down 26.94% YoY, and due to the following reasons. First, the Chinese New Year holiday in February caused overall operating rates at copper processing enterprises to fall, reducing demand. In addition, copper processing enterprises had generally built up stocks before the holiday, further restricting imports. Second, importers were generally closed for the holiday, negatively affecting imports. Third, an optimistic outlook for copper prices helped imports hit 354.2 kt in January, increasing copper inventories in Shanghai bonded areas. These high inventories depressed market enthusiasm for imports. Fourth, the SHFE/LME copper price ratio moved between 7.4-7.5 in February, creating no incentives for imports and leading downstream producers to purchase domestic goods for production instead.
Downstream demand for copper should improve as production resumes at downstream producers and with the arrival of the traditional peak demand period. In this context, China’s imports of unwrought copper and copper semis should rebound in March from February’s lows. However, imports will not increase significantly in March due to the existing high inventories, with stock levels expected between 300-350 kt.
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