Copper, a bellwether for the global economy, lost its cool following the rout across global financial markets amid the coronavirus (2019-nCoV) fallout.

SHFE copper rapidly fell to the daily down limit after it opened on Thursday March 19, with the May contract falling by 5.98% to 37,570 yuan ($5,343.14) per tonne. On Wednesday, the May copper contract hit the down limit in the afternoon after a relatively stable movement in the morning session.

“[It’s] terrifying and a bit unexpected, China’s spot copper trading comes to a halt after the price collapse and all exit the market after the tumble,” a Shanghai-based trader said.

“The market is worrying about the growing economic impact from the virus, and what’s more frightening is the massive sell-off across global financial markets, despite a series of measures taken by many countries to contain the virus,” a second Shanghai-based copper analyst said.

Operating rates rise at Chinese copper fabricators
A positive sign out of China is that Chinese copper fabricators are running higher operational rates, but they are not eager to buy copper cathodes, Fastmarkets was told.

“Our production resumption had been delayed by the virus outbreak this year but recently, operating rates have been increasing after the removal of transportation limitations and workers returned. Now, the rate is between 70-80%, largely flat from a year ago,” a major copper-rod factory source said.

“Our raw material stockpiles are sufficient for current production, while end-user demand is still recovering from the virus-delayed market, [which is] delaying our sales, so we’re not very keen to buy cathodes,” the same plant source added.

Another plant source also told Fastmarkets that its production is almost back to normal, but the company is in no hurry to replenish copper cathodes.

“There is lots of supply in China’s domestic market, but it’s risky to enter the market now after the price crash,” the second plant source added.

A poor import arbitrage and a lack of buying appetite capped the recent upside in Shanghai copper premiums over the past few weeks.

Fastmarkets’ copper import arbitrage was calculated at a loss of $28.79 per tonne on March 18, declining from a loss of $64.51 per tonne the day before and a loss of $95.13 per tonne on Monday March 16.

Fastmarkets assessed the copper grade-A cathode premium, cif Shanghai at $50-65 per tonne on Wednesday, unchanged since March 10.

“I originally expected the premium to rise to above $70 per tonne by late March amid returning demand in China, but it’s difficult to judge now because of lots of uncertainty from the global virus outbreak,” a Singapore-based trader said.