Chinese copper market participants waiting for recovery in demand

Spot premium for copper cathode into China inched up slightly, while Chinese market participants were awaiting a recovery in demand and the premiums in the United States remained unchanged

  • Shanghai premium up slightly, but remains low
  • EQ supply tightens in Shanghai and wider Asian region
  • US market unmoved, with demand well covered by long-term contracts

Asian market remains quiet

Import conditions remained unfavorable for Chinese market participants in the week to Tuesday, February 21, but there was still some spot activity concluded slightly higher for copper cathodes with March arrivals.

Fastmarkets assessed the daily benchmark copper grade A cathode premium, cif Shanghai at $12-38 per tonne on Tuesday, February 21, up by $4-10 per tonne from $8-28 per tonne a week prior.

Fastmarkets’ daily assessment of copper grade A cathode premium, in-whs Shanghai was $15-35 per tonne the same day, unchanged from a week earlier.

Overall spot business remained quiet amid a sustained arbitrage loss, which provided no incentives for spot buying, market participants said.

“The sustained arbitrage loss is keeping most market participants on the sidelines, And there was no notable improvement on the demand side, which also muted spot activity,” a Shanghai-based trader said.

Despite a recent rally, the market has remained at a very low level since tumbling from highs in November 2022, and the current low premiums have also discouraged supplier spot sales, Fastmarkets understands.

“The market is in [such] a condition that buyers don’t want to buy and sellers don’t want to sell either. All are waiting for a clearer picture in March,” a second trader in Beijing said.

Fastmarkets’ copper import arbitrage calculation was at a loss of $202.49 per tonne on Tuesday, compared with a loss of $146.83 per tonne a week earlier.

Big arbitrage losses also muted spot trading in the non-registered copper cathode market, but its discount shrank amid very limited spot availability, market participants told Fastmarkets.

“There are some supply issues from Africa due mainly to logistical issues, supply disruption, etc, so spot supply is tight and preventing the market from falling further despite the lack of demand,” a third trader in Shanghai said.

Fastmarkets’ fortnightly assessment of the copper EQ cathode premium, cif Shanghai, was at a discount of $10-30 per tonne on Tuesday, against a discount of $20-40 per tonne two weeks earlier.

In the Southeast Asian copper market, spot business was still mostly quiet, with supplies of non-registered copper cathodes also tight.

Fastmarkets’ weekly assessment of the copper grade A cathode premium, cif Southeast Asia was $75-95 per tonne on Tuesday, widening upward from $75-90 per tonne the previous week.

Europe premiums remain stable

European premiums were broadly stable in the week to Tuesday, following multiple sessions where prices moved dramatically.

The start of 2023 saw the commencement of far higher long-term contracts, around 85% higher year-on-year. And for the first sessions of 2023 material purchased on 2022 contracts was providing liquidity for the lower end of the market.

Trader sources, however, said that most material from 2022 has now been “snapped up,” meaning that prices are starting to normalize to new long-term levels.

Despite lower amounts of 2022 material being around, sources said there was still a market for material below the 2023 annual levels, in all three assessed markets.

Fastmarkets assessed the copper grade A cathode premium, delivered Germany at $180-260 per tonne on February 21, widening upward from $180-250 per tonne on February 7.

The market in Germany ticked up due to continued liquidity above $250 per tonne.

The market in Germany benefited from stable demand from “electronics, automotive and energy transition-based demand” according to one market participant. Still, construction continued to be weak, due to continued high interest rates, several trader sources told Fastmarkets.

Despite the lack of 2022 material, the lower end of the delivered Germany market continues to be present with the liquidity highlighting the fact there is a market for material around $200 per tonne. But one trader source said that “less material was available at low levels [of around $200 per tonne]” and added that not much business at all was being done below $200 per tonne.

Fastmarkets’ fortnightly assessment of the copper grade A cathode premium cif Leghorn remained at $150-180 per tonne on February 21.

Fastmarkets was told there was no liquidity in the Italian market, but market participants said there had been an uptick in interest in the region.

“We had a few fresh inquires for Italy,” a trader source said, having highlighted the quietness of the market in Italy during the previous pricing session.

A number of sources attributed the uptick in demand to a slight increase in demand from the construction sector, which although still sluggish, was seeing increased activity.

The uptick does not, however, mean demand is now strong, and “not much is going on”, several market participants told Fastmarkets.

Fastmarkets’ fortnightly assessment of the copper grade A cathode premium, cif Rotterdam was unchanged at $80-120 per tonne on February 21.

Rotterdam remained quiet with no liquidity reported to Fastmarkets. One trader source said that, despite a belief that prices are likely to “move up closer to long-term contract levels,” no such upward movement had been seen.

US market watchful of supply and demand

The copper grade 1 cathode premium, ddp Midwest US was stable at 10-12 cents per lb on Tuesday, February 21.

It has been in this range since October 25, 2022.

The spot market was reported to be quiet, with production continuing as planned and buyers meeting their cathode needs under long-term contract quotas and staying away from the spot market.

“There is no spot business, people are still [working] with their January and February quotas,” one trader told Fastmarkets.

“It is early in the year. People are working through their year-end inventory; you would not expect a lot of spot business because everyone is contracted,” a buyer said. He added that, currently, there is no demand outside of what buyers have already planned and contracted for.

Traditionally, March is the busiest month in the first quarter with buyers assessing their future needs outside of their long-term contract quotas as they get ready for the second quarter starting in April, according to the trader.

However, some market participants reported being watchful of developments on both the supply and demand sides.

The trader said that spot business activity in the second quarter will depend on maintenance work at Rio Tinto’s Kennecott smelter in Utah from April to June and whether the shutdown extends beyond the planned period.

While the company has been building inventory to meet the needs of contracted customers during the shutdown period, the closure of one of only two primary copper smelters in the country could become problematic for spot availability of the red metal if the shutdown was to run beyond June, or if there is a spike in demand.

The trader added that construction activity tended to pick up in warmer months so demand could increase as summer approaches.

Market participants said they were also wary of developments in the economy because that could affect demand.

“It remains to be seen what will happen with the economy, the inflation rate and the US Federal Reserve’s rate increases,” the buyer said.

What to read next
Demand for primary aluminium from the green transition remains a “brighter spot” for consumption amid an otherwise challenging downstream demand outlook, Eivind Kallevik, Norsk Hydro’s chief executive officer and president, told Fastmarkets in an exclusive interview on Tuesday July 23
Persistently high import volumes of lithium carbonate into China have intensified oversupply in the country's domestic market for the material at a time when demand remains weak, sources told Fastmarkets on Tuesday July 23
Acquisition Company Limited (ACG) has agreed to buy the Gediktepe mine in Turkey — the company’s first deal as it works to build a sizeable mid-tier copper producer, its chairman and chief executive officer told Fastmarkets.
Copper market price speculation is driving the base metals narrative, head of research at UK-based services provider Sucden Financial Daria Efanova said during the company’s third-quarter metals webinar on Wednesday July 17.
Fastmarkets spoke with Canada-based Northern Graphite CEO Hugues Jacquemin on North American graphite, the electric vehicle (EV) industry and the need for a North American supply chain on Wednesday July 17
Rapidly expanding capacity for the recycling of lithium-ion batteries in the United States and Canada has raised worries over the supply of raw materials to feed processors in the region, sources have told Fastmarkets