China seen selling unbid copper in Shanghai
Wed Dec 14, 2005 1:05 PM GMT
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By Polly Yam
HONG KONG (Reuters) - China's State Reserves Bureau is likely to ship copper stored in inland provinces which failed to find a buyer in its latest three public auctions to Shanghai, the country's copper retailing base, for sale, traders said on Wednesday.
They said the copper would keep Shanghai prices below world prices which are at record highs, discouraging imports from China, the world's largest consumer of copper.
"They are shipping near 30,000 tonnes to Shanghai," a trader said, referring to the bureau, which is responsible for managing the country's strategic copper stocks.
On behalf of the bureau, the State Regulation Centre of Supplies Reserve sold 51,161 tonnes of spot copper in the past four auctions out of 80,000 tonnes on offer.
Of the centre's four auctions, it sold all 20,000 tonnes in its first auction on November 16 in Beijing, but left 28,839 tonnes unsold in the latest three auctions, mainly due to poor locations.
Traders had expected the bureau to hold five 20,000 tonnes auctions, part of a so far unsuccessful attempt to drive down copper prices abroad.
But unexpectedly poor results of the latest three auctions might lead the bureau to switch its planned fifth auction to the spot market, they said.
If the bureau put the unsold copper and the fifth 20,000 tonnes in Shanghai's spot market, the city would see extra supply of 48,839 tonnes of copper in the coming few weeks.
Traders said the bureau might ship more than 100,000 tonnes of spot copper, including the 48,839 tonnes, to Shanghai, if the demand there was strong.
TALK OF SHORT POSITION
The bureau is at the centre of market speculation that a trader, who was on the staff of the State Regulation Centre and supposed to work ultimately on behalf of the bureau, might have built a huge overseas short position.
Speculation that this short position might prove difficult to cover has helped drive prices on the London Metal Exchange to historic highs.
Futures dealers in China expect the centre, on behalf of the bureau, to deliver 18,000 to 19,000 tonnes of copper against a short position on the December contract of the Shanghai Futures Exchange. The contract will expire on Thursday.
They said the centre held another short position on the Shanghai January contract for around 20,000 tonnes of copper.
The further state sale was unlikely to create a surplus in Shanghai in the coming few weeks as Chinese smelters would export more copper to take advantage of higher LME prices, traders said.
One of China's top copper smelters shipped out 6,000 tonnes of copper last week to a LME warehouse in Asia for delivery against its short positions. Other top smelters would export a total of around 30,000 tonnes in the coming few weeks.
Chinese importers also would divert their copper already arrived Shanghai to LME warehouses in Asia due to lower domestic prices, traders said. |
