UPDATE 2-China seen suspending copper purchases, buying zinc
uk.reuters.com
Mon Jan 12, 2009 12:57pm GMT
By Polly Yam
HONG KONG, Jan 12 (Reuters) - China's State Reserves Bureau could have suspended planned copper purchases due to rising prices, an official aware of the government's plans and a producer said on Monday, but zinc buying will resume this week.
"We previously had a plan to build up copper reserves but it now seems we've had to suspend it," said the official, adding, "It's because of the price," without elaborating.
Copper prices on the London Metal Exchange MCU3 and Shanghai have risen since Beijing indicated it would buy base metals reserves in December. However LME copper, which had been up 13 percent this year, slipped 6 percent on Monday due to doubts about Chinese purchases.
Producers were also sceptical the government would buy copper in the short term.
"Copper prices have risen. The SRB of course won't follow the price. They can just wait for a while," said Pan Qifang, spokesman for Jiangxi Copper Co Ltd (0358.HK) (600362.SS), the country's top copper producer.
Shanghai's most active copper futures contract, for April delivery SCFJ9, rose 1,180 yuan to 28,190 yuan ($4,123) on Monday, despite talk that the SRB had cancelled the copper buying plan.
"The SRB may watch the market after the Lunar New Year. If local demand is bad, it may buy as reserve," the spokesman said.
Last month the SRB considered buying 700,000 tonnes of copper from three smelters, including Jiangxi copper, and later invited large smelters and trading houses for a 200,000-tonne bidding round out of a 500,000-tonne purchase plan.
Jing Chuan, chief researcher for Great Wall Futures in Shanghai, said the SRB was unlikely to cancel the plan to buy copper as reserves because it was part of the central government's resources buying plan.
One source said the State Reserves Bureau (SRB) may have already placed a contract to buy 300,000 tonnes of physical refined copper cathode, about one month's production in China, from a Chilean producer with monthly delivery of 25,000 tonnes this year.
Smelter and industry sources said the SRB met senior executives at copper smelters last Wednesday but purchasing did not seem to have kicked off.
SRB SET TO BUY ZINC
China's base metals buying spree will turn to zinc this week as the State Reserves Bureau has scheduled to meet smelters on Wednesday to buy the metal.
The SRB, which has already bought aluminium and indium, is scheduled to meet representatives of five or six large smelters for a zinc bidding round, part of its plan to buy base metals to help loss-making smelters and boost consumption, industry sources said on Monday.
"The SRB has called a meeting on Jan 14. It may buy 200,000 tonnes," a smelter source said.
The SRB is expected to pay smelters higher prices than those in the spot market, sources said.
Great Wall Futures' Jing Chuan said 200,000 tonnes was less than an expected 300,000 tonnes but it would still tighten supply on the spot market and drive up prices, given that the zinc surplus was not very big.
The zinc buying is part of the government's plan to increase reserves of resources, including copper, for which the world's top copper consumer produces less than it needs, Jing said.
The SRB, responsible for building and managing China's reserves, bought indium for reserves for the first time at a bidding meeting in Beijing last month, buying 30 tonnes at 2,000 yuan per kg from a large smelter.
It has agreed to buy 290,000 tonnes of primary aluminium ingots from eight smelters of which 150,000 tonnes would come from Chalco (2600.HK)(601600.SS), the country's top smelter.
The state body has also bought grains reserves. For more details on the SRB's recent purchases, click on [ID:nPEK7636]. (Additional reporting by Eadie Chen in Singapore, Editing by Peter Blackburn)
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