China’s Power Grid Investments Surge, Base Metals Prices Other than Copper Mired

SHANGHAI, Mar. 28 (SMM) – Although worries over the Cyprus debt crisis has faded, market confidence over base metals markets will hardly improve any time soon. Recently released economic indicators from China, the US and Europe were mixed, clouding market direction. As such, base metals prices will remain at the current low levels. Copper prices have slightly outperformed other base metals thanks to an increase in orders from downstream producers.   

Demand in China has shown signs of mild recovery. According to the China Electricity Council, power grid investments in China hit RMB 32.9 billion during the first two months of this year, up 43.7% YoY, leading to an increase in orders at domestic copper wire and cable producers. SMM’s surveys on domestic wire and cable producers reveal that operating rates at the surveyed producers will likely bounce back to above 70% in March, due largely to production resumption following the Chinese New Year and a notable increase in orders at large producers from the Sate Grid. 

Nevertheless, base metals prices remain weak at the moment, except for copper, which is only slightly resilient due to China’s growing investment in power grid.

SMM’s surveys found that many enterprises are purchasing only on an as-needed basis during traditionally high-demand season, which should have begun before the Chinese New Year.

Even if the US Federal Reserve does not end QE3 sooner than expected, the US dollar will remain firm against the euro. Absent orders from downstream producers, base metals prices other than copper are deprived of any upward impetus. (Edited by SMM)