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Copper Inventories Piling Up in China over Coronavirus Shutdown

Metal News - Published on Wed, 19 Feb 2020

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The recent coronavirus epidemic has caused a heavy impact on demand and supply of copper, leading to a sharp increase in inventories in China. Downstream processors delayed their resumption of operations due to logistical constraints, delayed return of workers and the absence of approval from authorities. Smelters, meanwhile, maintained production since the Chinese New Year holiday, even as transportation restrictions led to a shortage of storage capacity for sulphuric acid and heightened risks of excessive inventory of finished goods, which would subdue production. SMM data showed that social inventories of copper across Shanghai, Jiangsu and Guangdong stood at 403,000 tonnes as of February 14, up 188,000 tonnes from January 23, the last trading day before the CNY holiday. The inventories are likely to continue to trend higher in February and exceed 500,000 tonnes. Meanwhile, copper stocks across bonded warehouses increased 27,800 tonnes, and are expected to see a larger gain following the recovery of operations of warehouses.

Smelters also saw an inventory accumulation of copper cathode. An SMM survey showed that copper cathode inventories across Chinese copper smelters increased about 50,000 tonnes from a month earlier to a record high of 77,300 tonnes as of early February, which put smelters under great pressure in terms of storage capacity and cash flows.

Inventories of copper cathode and finished goods at copper processors have barely changed, as their resumption of operations was delayed. Processors are likely to see raw material stocks decreasing while finished goods stocks increasing upon resumption amid lingering logistical constraints.

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Posted By : Rabi Wangkhem on Wed, 19 Feb 2020
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