Copper’s surge toward a record high is starting to cause stress for industrial consumers in China, the world’s largest market for the metal.
Some Chinese manufacturers of electric wire have idled units and delayed deliveries or even defaulted on bank loans, according to a survey by the Shanghai Metals Market.
End-users, such as power grids and property developers, have also been pushing back delivery times, while producers of copper rods and pipes saw orders slump this week, the researcher said.
Copper on Thursday topped US$10,000 a tonne for the first time in a decade and has been among the best performers in a scorching surge in metals prices. The rally is being fueled by stimulus measures, near-zero interest rates and a global economic recovery from COVID-19.
“Domestic copper users are feeling the pain right now after the recent surge caught them off guard,” Guoyuan Futures Co (國元期貨公司) analyst Fan Rui said. “Electric wire producers are being hit the most, with smaller plants keeping run rates low as the spike is seen slowing the pace of investment by power grids.”
A gauge of China’s manufacturing industry slipped last month and the services sector also weakened, suggesting that the economy is still recovering, but at a slower pace.
To be sure, analysts at banks, including Goldman Sachs Group Inc, are predicting further gains for the metal as the global economy picks up pace.
Copper fell 0.6 percent to settle at US$9,825 a tonne on the London Metal Exchange (LME).
The metal reached US$10,008 on Thursday, the highest since February 2011.
Aluminum also declined, while nickel rose.
In sign of potential weakness in Chinese physical demand, the spot contract traded at a discount of as much as 215 yuan (US$33) a tonne to Shanghai futures’ prices this week, the widest in about 10 months.
The appetite for imports is also low, with the Yangshan copper premium, paid on top of benchmark LME prices, slumped to the lowest since data were first published in 2017.
There is a precedent for demand destruction in China amid higher prices, BMO Capital Markets analyst Colin Hamilton said.
“2006 was the only year this century where annual Chinese copper consumption fell on a y/y [year-on-year] basis, as marginal buyers simply stepped away,” Hamilton said in a note.
On Friday, gold for June delivery fell US$0.60 to US$1,767.70 an ounce, down 0.6 percent for the week.
Silver for July delivery on Friday fell US$0.22 to US$25.87 an ounce, down 0.8 percent weekly.
Additional reporting by AP
Gudeng Precision Industrial Co (家登精密), the sole extreme ultraviolet pod supplier to Taiwan Semiconductor Manufacturing Co (台積電), yesterday said it has trimmed its revenue growth target for this year as US tariffs are likely to depress customer demand and weigh on the whole supply chain. Gudeng’s remarks came after the US on Monday notified 14 countries, including Japan and South Korea, of new tariff rates that are set to take effect on Aug. 1. Taiwan is still negotiating for a rate lower than the 32 percent “reciprocal” tariffs announced by the US in April, which it later postponed to today. The
ELECTRONICS: Strong growth in cloud services and smart consumer electronics offset computing declines, helping the company to maintain sales momentum, Hon Hai said Hon Hai Precision Industry Co (鴻海精密) on Saturday announced that its sales for last month rose 10 percent year-on-year, driven by strong growth in cloud and networking products amid the ongoing artificial intelligence (AI) boom. The company, also known internationally as Foxconn Technology Group (富士康科技集團), reported consolidated sales of NT$540.24 billion (US$18.67 billion) for the month, the highest ever for the period, and a 10.09 percent increase from a year earlier, although it was down 12.26 percent from the previous month. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said its cloud
Video streaming giant Netflix is launching a talent cultivation program in Taiwan aimed at producing high-quality Mandarin content, the company announced in a press release on Thursday. Netflix Chinese language content head Maya Huang (黃怡玫) said that Netflix has long invested in the Taiwanese market, citing the Netflix Fund for Creative Equity launched last year as an example. The fund would continue to dedicate resources to discovering content with the potential to be developed into Chinese-language projects, she added. The financing for the new talent projects seeks to create an ecosystem for content creators and professional development programs, she said. The talent projects
APPRECIATION: The central bank stepped in to stabilize the NT dollar after a surge in foreign institutional investment, triggered by optimism about tariffs and US Fed policy Taiwan’s foreign exchange reserves hit a record high at the end of last month, as the central bank intervened in the currency market to curb the New Taiwan dollar’s appreciation against the US dollar. Foreign exchange reserves increased by US$5.48 billion from May, reaching an all-time high of US$598.43 billion, the central bank said on Friday. While the central bank did not disclose the scale of its intervention, Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said that the currency market remained relatively stable until the middle of last month. However, a shift occurred following the US Federal Reserve’s signal of a