Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Copper - analysis -- Ignore unavailable to you. Want to Upgrade?

To: Stephen O who wrote (190)	9/25/2000 12:12:49 PM
From: Stephen O	Read Replies (1) \| Respond to of 2131

(MB) - Help urged for China's downstream Cu sector 9/22/0 17:1 (New York) September 22 (Metal Bulletin) - The Chinese downstream copper sector requires investment to raise quality and reduce costs, which would lead not only to increased profitability but reduced imports. Feng Ke, metal analyst with China's Southwest Futures Brokerage Co, said in his paper on the Chinese copper rod industry that a lack of domestic financial support for the industry created a "vicious circle" in which a lack of investment lowered expectations and put Chinese copper fabricators further behind their western counterparts. "Quality is still at the level of the 1950s and 1960s in the West," he said. China's continued economic growth has meant surging copper consumption, rising by 5.5% in 1999 to 1.81m tonnes. Feng pointed out that the main end-use for copper in China is the electricity and power industry, representing 77.71% of total consumption. With continued high-level investment in the country's infrastructure this sector has helped to boost demand. However, the production of copper products in China falls some way short of total demand. Last year's total production of copper products in the country was 1.28m tonnes. Although growth in output has averaged 9.63% every year since 1980, 1999's output was only slightly up on the previous year's figure of 1.25m tonnes. Furthermore, recent copper product output is far lower than 1995's total of 1.57m tonnes. This decline is due to the financial strife experienced by so many producers, said Feng, which often have obsolete equipment. Many are also operating well below their design capacity. Meanwhile, imports of copper tubes have risen to reflect increased construction, hitting 44,791 tonnes in 1999 compared to 22,252 tonnes in 1995. In the copper foil market, a product in which China is let down badly by its lack of technical investment, imports have risen to 103,746 tonnes from 40,829 tonnes in the same comparison. Exports of Chinese copper products have seen nothing like as dramatic a change in the last decade. Feng added that the old structure of the Chinese copper industry favoured smaller fabricators which could supply domestic demand, but small plants in today's market are proving inefficient. He said that he hoped China's admission to the WTO would speed up change by giving it improved access to foreign markets. Traders reported little business this week as the market waits with bated breath to see what will happen in the first round of the mating season talks for copper concs between Chilean miner Collahuasi and German smelter Norddeutsche. One trader said: "They will be the trend-setters this year for the benchmark because their positions are not so very far apart, they will settle in the low $70/7 cents per lb," he predicted. Another trader said: "The benchmark is always the Japanese and they have been gesturing that they will not settle below mid-year terms of $80/8 cents. They seem quite well stocked up so their positions is stronger." Following discussions at a Copper Club reception in New York last week, some traders seem to have changed their position about the market and said that the smelters felt more confident they would get a high price especially with the $150 spike in the LME over the past couple of weeks. "Why should the mines take all the profit," a trader said. Another trader said: "The smelters seem to pretty well stocked up at least for this year so there is not so much tightness as people were saying." However other traders were stressing impending tightness on the market next year and Freeport was reported to have been suggesting TC/RCs for 2001 at between 65/6.5 cents and $70/7 cents - not far off last year's benchmark of $69/6.9. "Freeport thinks the market is tighter and is expecting big improvements, the Japanese will be delighted if they are able to settle at mid-term numbers again, the general consensus is that the market is at $75/7.5 cents per lb," a trader said. On the spot market traders reported minimal activity from the Chinese who they said were not buying at below $70/7 cents. The copper market is currently assessing the price rise that Chilean state-owned copper producer Codelco is likely to announce in this year's mating season for its long-term copper cathode contracts in 2001 with fabricators in Europe and Asia. One European consumer said he thought the price rise would be around $3-4 per tonne over last year's $38 based on the average. "Last year the situation was very different," a consumer said. "There were very low prices and mines such as BHP Magma had to close. But this year LME stocks have gone down and statistics show that in the first half consumption was higher than production for refined material so an increase in cathode premiums is on the cards." Another European consumer disagreed: "They will try and push as they always do. During the mating seasons we usually look back on the previous year and you cannot really say that cathode spot premiums have been higher than the official long-term contracts so it shouldn't warrant a rise because copper has been plentiful in 2000. The only thing they can argue is that copper is not going to be plentiful tomorrow. Copper remains plentiful but Codelco will try to increase the price." Two European consumers said any price hike would not affect their business. One said: "When we sell rods we apply the same producer premiums so it makes very little difference." However, traders said they think the rise in the premium will be much higher. One trader said he thought that Codelco will push for at least $4 per tonne over the $38 achieved last year, while another trader said he thought Codelco will push for at least an increase of $10 in the 2001 annual contracts. Metal Bulletin newsroom, London Tel +44 207 827 9977 Fax +44 207 928 6892 New York Tel +1 212 213 6202 Fax +1 212 213 6273