[Click here for an interactive chart of copper prices]
Highlighting the uncertainty, Caixin’s report on Wednesday showed that manufacturing shrank for a sixth straight month in January, undercutting a more positive reading on factory activity from the statistics bureau the day before.
Copper futures have risen about 20% since the start of November, the month when China’s commitment to Covid Zero first began to wobble. That puts the metal at risk of a pullback if demand conditions don’t improve soon, said Jiang Hang, head of trading at Yonggang Resources Co. in Shanghai.
“We are very cautious on copper, which has priced in high expectations” as China reopens, said Jiang, citing a build-up in domestic stocks and low run-rates at fabricators. Belying the run-up in futures markets, spot and import premiums for the metal have dropped, with the premium paid at the port of Yangshan falling to its lowest since April.
“While everyone agrees that China’s reopening is “unequivocally positive for copper”, to quote Capital Economics, many appear to share the research house’s caution around the likely strength of the demand rebound,” wrote Reuters columnist Andy Home.
“The world’s biggest metals consumer still faces problems reinvigorating a moribund property sector and the impact on exports of slower growth in the rest of the world.”
“We believe that the early January direction is correct but that the timing is slightly off,” said Saxo Bank, which is expecting improving Chinese demand to kick in only from the second quarter.
(With files from Reuters and Bloomberg)