(Bloomberg) -- 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, said the researcher.
Copper topped $10,000 a ton on Thursday 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 the global economic recovery from Covid-19.
“Domestic copper users are feeling the pain right now after the recent surge caught them off guard,” said Fan Rui, an analyst at Guoyuan Futures Co. “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.”
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Copper was little changed at $9,887 a ton on London Metal Exchange as of 9:45 a.m. in London. The metal reached $10,008 on Thursday, the highest since February 2011. Aluminum and nickel both rose.
A gauge of China’s manufacturing industry slipped in April and the services sector also weakened, suggesting the economy is still recovering but at a slower pace. The official manufacturing purchasing managers’ index fell to 51.1 in April from 51.9 in the previous month, the National Bureau of Statistics said Friday, lower than the median estimate of 51.8 in a Bloomberg survey.
In sign of potential weakness in Chinese physical demand, the spot contract traded at a discount of as much as 215 yuan a ton ($33) to Shanghai futures’ prices this week, the widest in 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.