Economic slowdown, trade disputes to keep SHFE copper weak in Jan-Shanghai Metals Market

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Economic slowdown, trade disputes to keep SHFE copper weak in Jan

SMM Insight 04:59:05PM Dec 28, 2018 Source:SMM

SHANGHAI, Dec 28 (SMM) – Copper prices across Chinese markets are likely to remain weak at the start of 2019 as stable supply and weaker demand grow inventories, and as downbeat economic data and trade tensions with the US weigh on investor sentiment.

Beijing's efforts to boost demand, however, is likely to put a floor under copper prices. The most-traded copper contract on the Shanghai Futures Exchange is likely to trade at 47,500-50,200 yuan/mt in January.

SHFE copper prices in December took a hit from plunges in oil prices, turmoil on Wall Street and the Fed’s interest rate hikes as well as rising worries about global slowdowns.

As of December 21, stocks of copper cathode across SHFE-registered warehouses declined 13,200 mt in the last month of 2018. For the same period, stocks in Shanghai-bonded areas climbed 9,500 mt, SMM data showed.

Narrow price spreads between copper scrap and copper cathode lowered the appeal of scrap and inventories of refined materials. Environmental issues and lower copper prices tightened supplies of copper scrap and shrank discounts against refined materials.

Newly-commissioned and resumed capacities of Chalco Southeast, Western Mining's smelter in Qinghai and SDIC Jincheng Metallurgy are close to full capacity. This, together with limited planned maintenance and high prices of sulphuric acid, is set to account for high operating rates across Chinese copper smelters in January.

Consumption across end-markets remained sluggish. In the first 11 months, property sales by floor area rose 1.4% from a year earlier, 0.8 percentage point down from January-October, showed data from National Bureau of Statistics (NBS).

In November, car sales totalled 25.5 million vehicles, standing 13.86% lower than November 2017, data from the China Association of Automobile Manufacturers (CAAM) showed.

Realised investment in power grid projects amounted to 451.1 billion yuan in January-November, a year-over-year decline of 3.2%, according to data from the China Electricity Council.

Many small and medium-sized Chinese firms, who account for the majority of China’s end-markets, are likely to suspend in the second half of January, in anticipation of Chinese New Year. This is set to shrink overall consumption in January.

Growth in China's vast manufacturing sector stalled for the first time in over two years in November, with the official purchasing managers' index (PMI) falling to 50, indicating no growth in activity or contraction.

For the same month, earnings across industrial firms dropped for the first time in nearly three years. Industrial profits fell 1.8% in November from a year earlier to 594.8 billion yuan ($86.33 billion), according to the NBS. It marked the first decline since December 2015.

Key Words:  Market commentary   Copper 

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Economic slowdown, trade disputes to keep SHFE copper weak in Jan

SMM Insight 04:59:05PM Dec 28, 2018 Source:SMM

SHANGHAI, Dec 28 (SMM) – Copper prices across Chinese markets are likely to remain weak at the start of 2019 as stable supply and weaker demand grow inventories, and as downbeat economic data and trade tensions with the US weigh on investor sentiment.

Beijing's efforts to boost demand, however, is likely to put a floor under copper prices. The most-traded copper contract on the Shanghai Futures Exchange is likely to trade at 47,500-50,200 yuan/mt in January.

SHFE copper prices in December took a hit from plunges in oil prices, turmoil on Wall Street and the Fed’s interest rate hikes as well as rising worries about global slowdowns.

As of December 21, stocks of copper cathode across SHFE-registered warehouses declined 13,200 mt in the last month of 2018. For the same period, stocks in Shanghai-bonded areas climbed 9,500 mt, SMM data showed.

Narrow price spreads between copper scrap and copper cathode lowered the appeal of scrap and inventories of refined materials. Environmental issues and lower copper prices tightened supplies of copper scrap and shrank discounts against refined materials.

Newly-commissioned and resumed capacities of Chalco Southeast, Western Mining's smelter in Qinghai and SDIC Jincheng Metallurgy are close to full capacity. This, together with limited planned maintenance and high prices of sulphuric acid, is set to account for high operating rates across Chinese copper smelters in January.

Consumption across end-markets remained sluggish. In the first 11 months, property sales by floor area rose 1.4% from a year earlier, 0.8 percentage point down from January-October, showed data from National Bureau of Statistics (NBS).

In November, car sales totalled 25.5 million vehicles, standing 13.86% lower than November 2017, data from the China Association of Automobile Manufacturers (CAAM) showed.

Realised investment in power grid projects amounted to 451.1 billion yuan in January-November, a year-over-year decline of 3.2%, according to data from the China Electricity Council.

Many small and medium-sized Chinese firms, who account for the majority of China’s end-markets, are likely to suspend in the second half of January, in anticipation of Chinese New Year. This is set to shrink overall consumption in January.

Growth in China's vast manufacturing sector stalled for the first time in over two years in November, with the official purchasing managers' index (PMI) falling to 50, indicating no growth in activity or contraction.

For the same month, earnings across industrial firms dropped for the first time in nearly three years. Industrial profits fell 1.8% in November from a year earlier to 594.8 billion yuan ($86.33 billion), according to the NBS. It marked the first decline since December 2015.

Key Words:  Market commentary   Copper