Shanghai Copper Surges on Signs of Strengthening Demand in China

Shanghai copper prices rose over 1% due to improving demand in China, reaching 79,140 yuan per metric ton. The increase was supported by growth in grid infrastructure and electric vehicles. However, analysts foresee a potential decrease in copper output as smelters undergo maintenance, while global trade concerns may limit further gains.

On Wednesday, Shanghai copper prices rose over 1%, reflecting signs of enhanced demand in China, the leading consumer of metals. The most active copper contract on the Shanghai Futures Exchange concluded morning trading at 79,140 yuan ($10,939.10) per metric ton, marking a rise of 1.74% and reaching its highest level since September 30, 2024, at 79,390 yuan.

The increase in underlying demand is signified by the ANZ Downstream Copper Demand Indicator, which indicates noteworthy growth, particularly in grid infrastructure and electric vehicles, as noted by ANZ analysts. Additionally, manufacturers are escalating production efforts, buoyed by recent stimulative policies, leading to a decline in copper cathode inventories in Shanghai and Guangdong due to reduced imports.

However, analysts at First Futures predict a decrease in refined copper output in China for April, as numerous smelters will initiate equipment maintenance, and those facing significant losses are expected to reduce their capacity utilization rates. Notably, copper cathode output among surveyed smelters surged by 5.28% year-on-year to 1.9 million tons during January-February, with March output anticipated to increase by 4.32%, reaching 969,000 tons.

China’s annual copper consumption constitutes approximately half of the global supply. Nevertheless, concerns regarding a potential global trade war are tempering price gains, according to ANZ analysts. Other base metals also experienced price increases, with aluminum rising by 1.13% to 20,990 yuan per ton and zinc increasing by 0.99% to 23,945 yuan, among others.

The London Metal Exchange also witnessed upward movement in copper prices, with three-month copper climbing 0.52% to $9,729 per ton, reflecting a broader trend in the base metals market.

In summary, Shanghai copper prices have experienced a significant rise due to improving demand indicators from China, bolstered by governmental stimuli and increased production efforts. Despite a predicted decline in refined copper output due to smelter maintenance, the overall outlook for copper remains positive, aligning with growth in other base metals. However, uncertainties regarding global trade dynamics pose risks to continued price advances.

Original Source: www.tradingview.com