China's Copper Demand Faces Slowdown Amid Lunar New Year Holiday

Chinese copper buyers are extending their break for the Lunar New Year holiday, which officially begins on February 12 and ends on February 23. This extended hiatus is expected to significantly impact industrial demand for copper, as near-record prices have deterred purchases. Wang Wei, general manager of Shanghai Wooray Metals Group Co., noted that the price surge has increased financial costs for copper rod and pipe producers, leading to reduced order books. Some producers in southern China halted production as early as January 25 and will not resume operations until March, according to a survey by consultancy Mysteel Global, which covered approximately 3.3 million tons of capacity—about one-fifth of the country’s total.

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The recent rally in copper prices, which saw the metal reach an all-time high above $14,500 per ton on January 29, has been driven by speculative interest amid tightening supply and its critical role in new energy and computing sectors. However, as industrial buyers retreat during the holiday, analysts suggest that this speculative momentum may not align with real-world demand. Zhou Xiao’ou, an analyst with Zijin Tianfeng Futures Co., indicated that if prices remain below 100,000 yuan ($14,400) per ton when buyers return, the impact on demand could be substantial. Additionally, inventory depletion at fabricators may create opportunities for renewed purchases.

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As the holiday approaches, exchange inventories of copper have been rising, with total stockpiles in warehouses tracked by the London Metal Exchange, Shanghai Futures Exchange, and Comex exceeding 970,000 tons—the highest level since 2003. More than half of these reserves are located in the United States. Sam Crittenden, an analyst at RBC Capital Markets, remarked on the reluctance of end users to buy at elevated prices, suggesting a consolidation around $6 per pound. Despite the current slowdown, he anticipates that demand will continue to push prices higher in the coming years, although supply may struggle to keep pace.

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Critics of the current market dynamics point to the disconnect between speculative trading and actual industrial demand. The extended holiday shutdowns and high prices have raised concerns about the sustainability of the recent price rally. Additionally, the broader implications of China’s economic slowdown are becoming evident, as the once-close relationship between industrial metals and the Chinese economy appears to be weakening.

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• “increased financial costs at copper rod and pipe producers, and reduced their order books,” — Wang Wei, General Manager, Shanghai Wooray Metals Group Co.

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• “We are seeing some consolidation around $6 a pound and some reluctance from end users to buy at elevated prices,” — Sam Crittenden, Analyst, RBC Capital Markets.

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