SHANGHAI, Feb 26 (SMM)—The most-traded SHFE 2104 copper contract rose for six consecutive days after the Chinese New Year holiday, surging by more than 21% from February 3. Soaring copper prices have brought more challenges for downstream copper processors.
A sharp decline in new orders amid surging copper prices prompted copper processors to slow down production
Operating rates in the copper industry would have risen after the CNY holiday, but high copper prices kept copper downstream users on the sidelines. Currently, copper processors have resumed operations, but a steep fall in new orders prompted them to slow down production.
Copper processors kept low raw materials inventories
High copper prices and concerns over the COVID-19 pandemic drove copper processors to restock raw materials only as required. Large-scale processors kept relatively higher feedstock inventories, but they can only guarantee production till early March. Raw material stocks were low across most of the downstream users as the continuous rises in copper prices made them cautious about restocking. Meanwhile, inventories of finished products remained low as high copper prices and tepid demand deterred processors from producing.
Soaring copper prices post cash flow issues for copper processors
Many producers of copper wire and cable, enamelled wire and copper tube told SMM that they are facing pressures of low orders and tight cash flows.
Spot copper remained traded at deep discounts as copper futures prices jumped
The average discount of SMM 1# copper cathode expanded to 205 yuan/mt on February 25 as traders promoted sales.