Copper futures hit three-year low on global coronavirus concern

New York — Copper prices in China broke Yuan 45,000/mt ($6419/mt) support on Friday as the market worried over coronavirus' reach beyond China, while demand in the domestic market remained low.

The most liquid copper futures contract listed on Shanghai Futures Exchanges closed at Yuan 44,390/mt ($6332/mt) Friday, a low not seen since December, 2016.

"Coronavirus spreading from China to South Korea, Japan and other countries has triggered selling of non-ferrous products. Market worried that global copper demand will have impact," an analyst from Shanghai said.

Operating rates at copper and aluminum products processors averaged 59% this week, up 12.9% from the week before, according to the China Nonferrous Metals Industry Association, or CNIA.

But sources observed that actual utilization rate was still low this week due to transportation limitation among cities, and not enough downstream orders to support them.

"Sectors such as home appliances, property sectors and power industry are still operating at low rates," a Chinese copper seller said. "Copper processors would carefully operates as they have cash flow concern."

Power sector and home appliances make up 65% of China's copper demand in total.

A copper trader said that copper physical liquidity was quite low in the domestic market, and he expected the situation to improve in the second-quarter.

Copper stocks at Shanghai Futures Exchange copper warehouses in Shanghai, Guangdong, Jiangsu, Zhejiang and Jiangxi were up by 13.6% in the week to February 21, raising total inventories to 298,619 mt, latest SHFE data showed.

But some sources said that copper prices have fallen to the bottom, and the low price should encourage manufacturers to restock materials.

"Copper prices still have short-term pressure, but its trading at low levels if we look at medium-term," a trader said.