Copper demand in the world's second-largest economy softened in April, due to subdued global demand for China's products and persistent weakness in the country's property market.
In addition to an unexpected contraction in April manufacturing activity, a double-digit slump in Chinese industrial firms' first-quarter profits also pointed to a patchy economic recovery.
Shrinking orders and lower profits forced many copper products producers to cut their production in recent months.
The stagnant economic recovery coupled with higher domestic production led to the drop in imports, said Anna Xu, a Shanghai-based lead analyst at Argus Media. The first four months saw unwrought copper imports slide 12.6% year on year to 1.7 million tonnes. Denting demand further, copper is being used less as collateral to raise finance in the market, analysts said. "After Maike's crisis, it's getting more difficult for companies to finance with copper," said Xu. Previously China's top copper importer, Maike was reported to have used the metal as collateral to finance investments in property. The company applied for pre-restructuring in February after running short of cash last year.
In an email to Reuters in January seeking comment on the reports, Maike did not confirm their use of copper financing, but said "raising finance is extremely difficult for private companies without asset as collateral". Maike said it made some business investments in recent years "to meet finance needs for the company's operation and development".
Weaker-than-expected demand in China, including less use of
copper as collateral in finance, will lead to a 250,000-tonne
drop in refined copper imports in 2023, a decline of 6.8% from
last year, said Ye Jianhua, a director at Shanghai Metals
Market.
Imports of copper ore and concentrate last month came to 2.1
million tonnes, the data also showed, up 11.7% on a year ago,
driven by higher record domestic production of refined metal.
(Reporting by Siyi Liu and Dominique Patton; Editing by Himani
Sarkar, Christian Schmollinger and Sonali Paul)
