China's Copper Imports Expected to Grow Modestly
By David Harman
19 Jan 2007 at 09:07 AM EST
resourceinvestor.com
SHANGHAI (Interfax-China) -- China's copper imports are expected to grow at a modest rate in the first quarter of 2007, as firms replenish exhausted copper stockpiles and with prices roughly the same or even higher than international prices, industry insiders said.
"Restrained by the international copper price being higher than the domestic price, copper fabricators and copper consuming firms have been reluctant to import copper and relied on import stockpiles and scrap copper imports in 2005," Duan Shaofu, a senior official with the China Nonferrous Metals Industry Association (CNMIA) said.
China imported 111,159 tonnes of copper in December, the highest monthly level in 2006, increasing 40.68% from November and 41.28% from the same period of 2005. However, China imported 585,190 tonnes refined copper and copper alloy in the first 11 months, down 35.8% from last year, according to the General Administration of Customs.
Duan predicted that copper imports would climb modestly in the first quarter of this year.
"There is a common market practice in China that most people buy copper during upward and not downward trends," he said.
Li Yusheng, an analyst with Beijing Antaike Co. Ltd, a government-affiliated nonferrous metals consultancy, said most companies are restocking a month's worth of supplies, but physical imports will definitely rise in the first quarter as most consumers purchase foreign copper rather than domestic copper, triggered by lower prices.
Some analysts believe the State Reserve Bureau (SRB) will start re-stocking copper after it dumped a substantial amount on both the domestic and the international markets in 2006, but others feel it is not practical for the SRB to buy copper at this level after selling contracts at $3,500-$4,000 a tonne in 2005.
Li Yusheng said that there is a small possibility that the SRB will rebuild its stockpiles in the short term.
"The SRB is trying to control the severe market movement, but since copper prices tend to be relatively stable, there is not much need to stockpile right now," he added.
Jinlong's Lu said that the SRB needs to make up the losses incurred after a wrong bet on the LME in 2005, and it is pointless for them to set up buying contracts right now, as the copper price is still at higher level.
However, the SRB has not released any official statistics or auctioned copper in public, so
An exact figure on how much the SRB dumped in 2006 is hard to ascertain, however short positions were estimated at 100,000 to 150,000 tonnes, which was considered a major factor triggering more speculative funds to be injected into the market, pushing up prices.
China, the world's largest copper consumer, used about 3.6 million tonnes of copper in 2005, a year-on-year increase of 9%. Its copper import accounted for around 45% of its demand.
Total world copper usage gained about 1.6%. Production rose 6% from a year ago to 14.5 million tonnes, while mine output dropped to 12.2 million tonnes.
Shanghai copper futures price have fallen nearly 7% since the beginning of 2007, following the LME. Today, copper is priced at $5,601/tonne.
Commentary
There is a trend for end users to buy the spot market as and when working stock is depleted. Globally traders have been focusing on the reduced consumption in China, weak U.S. housing market and general oversupply.
There are signs that the U.S. housing market may be over the worst with a climb in December starts. The big jump in building permits my further confirm this.
Should the SRB replenish along with industry, and hedge funds take heart in the latest U.S. figures, there might be some recovery in price which has fallen 32% from September highs.
© Interfax-China 2007
This article comes from Interfax China Commodities Daily, a daily digest produced by Interfax News Agency in Mainland China. To receive 5 free copies of this, please e-mail alison.crawford@interfax.co.uk. |
