SMM Copper Demand Surprise Index: China Copper Demand to Worsen in April 2017

SHANGHAI, Apr. 17 (SMM) – The SMM Copper Demand Surprise Index (SMMCDSI) was -30.65 in March, below market expectations, and the index is expected to weaken further to -43.09 in April, a sign that copper demand in China is estimated to drop further from market expectation.

SMM survey finds that orders at domestic copper tube/pipe, copper plate/strip, sheet and foil producers recovered after the 2017 Chinese New Year holiday from late January to early February, but dropped at copper wire rod producers on a yearly basis. Hence, the average operation rate at domestic copper processing enterprises fell in March on a yearly basis as copper demand in the copper wire rod sector accounts for about 53% of the total. (For details, please see SMM Copper Monthly Report)

The SMMCDSI averaged at 31.68 in 2016 thanks to different positive factors, higher than market estimation. However, the reading fell to the negative territory for the first time in March 2017 due to worries on real estate, home appliance and power sectors. In 2016, China’s copper consumption growth was up from 2.7% in 2015 to 3.02% in 2016, supported by new highs of both auto production and sales, investment growth in power sector and the recovery of real estate market. After the higher-than-estimated growth in 2016, markets expected too much for the 2017 market.

The SMM Copper Demand Surprise Index (SMMCDSI) is an objective and quantitative method of evaluation of copper demand in China, and the index is issued around 15 every month, and the issuing date will likely be advanced for business development in the future.

The SMMCDSI index defines the spread between published data of refined copper cathode and scrap copper supply in China, and SMM surveyed and estimated data of domestic copper downstream producers. After normalization, the spread is called the Surprise. When the reading is in positive territory, it indicates that copper demand is above market expectation, and when the reading is above 50, it indicates a high chance for copper futures prices to rise; when the reading is in negative territory, it indicates that copper demand is below market expectation, and when the reading is below -50, it indicates a high chance for copper futures prices to fall.