(Bloomberg) -- A pile-up of inventories suggests that China’s metals consumption remains on the back-foot after disruptions to industrial activity during the Winter Olympics and Lunar New Year.
How quickly demand recovers now that the festivities are over, and whether consumers will accept relatively elevated prices, will help set the direction for markets in coming days and weeks. Although the central bank kept its benchmark lending rates unchanged on Monday, and declines in new home prices eased last month, there seems little doubt that Beijing stands ready to buttress demand against the backdrop of wider distress in the property sector and other indicators like slumping car sales.
Among Chinese fabricators, the recovery in consumption has been slower than expected, with copper rod producers operating at just 59% of capacity last week, according to Shanghai Metals Market. A resurgence of Covid-19 cases in eastern China has also affected purchases, it said.
That’s driven a spike in stockpiles. Copper held in warehouses tracked by the Shanghai Futures Exchange surged 28% last week and have more than quadrupled this year. Inventories of aluminum and zinc also extended gains. The Yangshan premium, an indicator of import demand for refined copper, is at its lowest since July.
In ferrous markets, the slowdown in construction has lifted rebar inventory to a 10-month high, according to Steelhome. And iron ore stockpiles at Chinese ports haven’t been this strong since June 2018, despite the government’s campaign to prevent hoarding and cool prices.
Still, Beijing’s efforts to keep markets like iron ore and coal in check surely presage broader fiscal stimulus that can only lift demand. In the meantime, steel mills in Hebei province are gearing up to restart production after curbs to combat pollution during the Olympics, according to Mysteel.
Today’s Events
(All times Beijing unless noted)
- Nothing major scheduled
Today’s Chart
Asia’s best-performing equity funds of last year have tumbled as their bets sour on renewables. Part of the problem is a mismatch in China “between green ambition and the reality of near-term dependency on traditional energy,” said Hao Hong, chief strategist at Bocom International.
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The Week Ahead
Tuesday, Feb. 22
- Nothing major scheduled
Wednesday, Feb. 23
- China Photovoltaic Industry Association holds online 2021 review and 2022 outlook briefing, 09:00-17:00
Thursday, Feb. 24
- Bloomberg’s China economic survey for February, 10:00
- EARNINGS: HKEX
- USDA weekly crop export sales, 08:30 EST
Friday, Feb. 25
- China weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~15:30
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