China's strong consumption to support copper price rebound
Source: Interfax
metalsplace.com
09 Feb 2007 – A recovery in China's copper consumption is expected to support the rebound of copper futures prices in the coming month, analysts said yesterday.
Three-month copper futures prices on the London Metal Exchange has fallen by 10.4% to $5,475 a tonne since the beginning of this year, with a four-month new low at $5,260 reported on Feb. 2.
Impacted by lower prices on the LME, the Shanghai Futures Exchange's copper futures prices slid 10.44% during the period. The most traded contract that will be delivered in April saw prices dive to a low of RMB 49,680 ($6,410.32) a tonne Tuesday.
This is the first time prices fell below RMB 50,000 ($6,451.61) since last March.
Analyst with Wanxiang Resources Co. Ltd, Zhang Xuliang, said China's copper consumption has recovered as copper imports have increased remarkably since the end of 2006.
China imported 95,831 tonnes of refined copper in December, up 59.4% from the same period in 2005. November imports were 79,017 tonnes while 68,342 tonnes of refined copper was imported in October.
Downward stockpile levels in the LME's Asian warehouses also indicate rising consumption triggered by China's downstream companies, said analyst with Great Wall Futures in Shanghai, Li Rong.
Both Zhang and Li believe China's copper consumption will continue to climb as the consumption peak season approaches after the Spring Festival and most copper-consuming companies are now building up copper stockpiles before the Spring Festival.
Li said there was a shortage of copper in the domestic cash market, triggering a rise in cash prices. The cash price of copper on the Shanghai Yangtze River Market averaged RMB 54,000 ($6,967.74) a tonne yesterday, up RMB 1,000 ($129.03) from the previous day's trading.
Zhang said China's strong consumption will support copper prices to rebound to $5,900 in March. However, he doubted this China factor could reverse the downward trend of the market, as global copper surplus remains an obstacle.
Total copper stockpiles of LME were down 1,450 tonnes to 212,575 tonnes on Feb 6, however, the figure is now at its highest level since March 2004.
Depression of recent copper prices was also attributed to fears surrounding the heavy losses of Red Kite Management, one of the most active hedging fund investors in the world. It was reported the company lost 20% between the start of the year and Jan. 24.
Copper future prices recovered yesterday in Shanghai, with the most active contract up RMB 600 ($77.42) to RMB 50,820 ($6,557.42) a tonne.
Shanghai Futures Exchange copper futures settled lower in active trade on Thursday to RMB 50,150/tonne after copper dropped on the London Metals Exchange, supported by rising stocks. "There is a supply surplus in the world market, and Asia's demand, especially from China, is supporting copper prices currently," said analyst Ren Jinwen at Huawen Futures. |
