SHANGHAI, Apr 1 (SMM) - Under the influence of the pandemic situation across China, the flow of goods in various warehouses has plummeted. In particular, Shanghai, which contributes to 70% of the domestic copper trade volume, locked down Pudong from March 28 to April 1 and would lock down Puxi from April 1 to April 5 in response to the surge in COVID cases.
This week, SMM has surveyed 12 copper cathode rod enterprises in Jiangsu, Zhejiang and Anhui, involving a total production capacity of 4.56 million mt Among them, 6 enterprises have stopped production due to insufficient supply of raw materials or planned to suspend production during the Qingming Festival, and two other enterprises began to reduce output this week. These two companies are located in Jiangsu Province and the extremely low transportation efficient from Shanghai led to raw material shortages. The output cuts at these two companies is expected to affect 23,700 mt of output. Some companies had placed their hopes on twarehouses in Wuxi. However, Wuxi also entered lockdown on the night of March 30. A few companies turned their attention to the Shandong market, but most companies were deterred by high shipping costs. The current freight rate from Shandong to Jiangsu is up to 300 yuan/mt, thus few copper rod makers are willing to source cargoes from Shandong. Copper rod makers in Anhui, however, are currently under normal production as they are able to purchase copper from local copper smelters with the help from the local government.
As most of the copper warehouses are located in Puxi, the lockdown in Puxi will lead to quiet copper market, which may force more copper cathode rod makers to shut down. Due to the logistics issues, most copper rod makers in Jiangsu and Zhejiang will face high inventory of finished products. Copper shipments by railway have been prolonged due to the pandemic. Some smelters actively exported their copper to overseas market for profits. This, coupled with concentrated maintenance in April and May, will tighten copper supply.
Supply and demand in spot copper market have declined. Operating rates of secondary copper rod makers also fell.
