SHANGHAI, Mar 1 (SMM) – Activity across major copper downstream industries in China shrank to a one-year low in February as consumption and production stagnated around the Chinese Lunar New Year.
The purchasing managers' index (PMI) fell for the second straight month, dropping to 44.95 in February from 48.43 in January, according to SMM data released on Friday March 1. The 50-mark separates growth from contraction on a monthly basis.
SMM’s survey covered construction, power, electronics, transportation and home appliance sectors in China, which are major consumers of copper.
End-market consumption was poor around the holidays. This prompted firms to scale back operations or close for long periods. SMM learned that producers shut for longer than usual this year. This, together with a shorter month, significantly lowered output for the month.
A breakdown of the survey’s findings showed the production sub-index dropped by 4.1 from a month ago to 39.97.
Total new orders—an indicator of future activity—however, edged back into expansionary territory, suggesting some improvement in domestic demand amid a raft of stimulus measures from the central government. Producers told SMM that they saw brisk orders after operation resumed after the middle of the first lunar month, or February 19.
The sub-index for new orders rose to 51.11, up 0.88 from January.
Producers saw their costs for raw materials climb in February as low inventories, trade optimism and concerns about supplies bolstered copper prices. The sub-index for purchasing prices of raw materials across downstream copper sectors gained 0.84 from a month earlier to stand at 51.83.
Low stocks and positive developments in US-China trade negotiations buoyed copper prices on the London Metal Exchange during the week-long holiday break. This boosted Shanghai copper above 50,000 yuan/mt after trades resumed. Scheduled maintenance works across copper smelters in March fuelled concerns about supplies, providing support to prices.
The sub-index for raw material stocks slipped 5.88 month on month to 40.89 in February as the long suspension of operation kept producers cautious about stockpiling.