Bloomberg News

China Copper Imports May Drop More Than Expected on Stocks

June 21, 2011

(Adds falling scrap supplies in 13th paragraph.)

June 21 (Bloomberg) -- China’s copper imports may plunge 32 percent this year, more than earlier estimated, as stockpiles in the world’s biggest user stay above average, said state-owned researcher Beijng Antaike Information Development Co.

“We have cut our forecast from 2.4 million tons made at the beginning of this year to 2 million tons,” said Antaike copper analyst Li Yusheng in a phone interview. “We think the destocking will continue.” Refined shipments fell 8.4 percent in 2010 to 2.92 million tons, according to the General Administration of Customs.

A decline in imports may push down prices further from a record reached in February. Shipments tumbled 47 percent in May from a year earlier as fabricators continued destocking, keeping local prices low and making it unprofitable to buy from overseas, data showed today.

“Imports failed to climb in a pickup of seasonal demand in April and May, and this isn’t a good sign,” Li said. “We think inventories at bonded and exchange warehouses can be further tapped to meet demand in the fall.”

Stockpiles at bonded warehouses in Shanghai have fallen to about 400,000 tons from as much as 600,000 tons two months ago, while the historical average was around 200,000 tons, according to Li. Inventories at the Shanghai Futures Exchange-monitored warehouses have fallen 51 percent from this year’s high in March to 87,310 tons last week, bourse data showed.

Imports of refined copper were 149,235 tons last month, compared with 279,690 a year earlier and 160,236 tons in April, data show. Shipments in the first five months fell 33 percent from a year ago to 905,434 tons.

Price Drops

Copper for delivery in three months on the London Metal Exchange was traded at $9,070 a ton at 4:43 p.m. Shanghai time, about 11 percent lower than February’s record of $10,190.

Imports have fallen as local output has risen and prices overseas have been more expensive, making imports unprofitable for traders who seek to exploit price gaps between markets. Refined-copper output in China hit a record 470,000 tons in March and was 439,000 tons in May.

“The London price is still too high for any restocking plan,” said Zhao Kai, an analyst Jinrui Futures Co., a subsidiary of China’s largest refined copper producer Jiangxi Copper Co. “As the June-to-August period is the usual slack season, we probably won’t see a strong rebound in imports, despite the significant decline of domestic stocks,” he said.

Rebound

To be sure, the drop in imports so far has prompted expectations of a rebound later this year among some analysts. Prices will rise to a record $12,000 a ton by the end of this year as Chinese imports begin rising from July, said Nicholas Snowdon, an analyst at Barclays Capital, on June 8.

Imports in June may jump 25 percent from April as consumption and investment demand rise, Jesse Jiang, the manager of copper research at Antaike, said June 7.

Copper may climb to a record $11,000 a ton by the end of the year, partly because Japan, the world’s fourth-biggest user, will need to rebuild following the March 11 earthquake, draining global inventories as mining output wanes, analysts in a Bloomberg survey said in April.

Dwindling supplies of copper scrap may also lift imports. Copper recyclers in southern China have been reducing output of refined metal on tight scrap supply, said an executive from Guangdong Qingyuan Yunnan Copper Nonferrous Metals Co.

“Scrap imports are too expensive, almost close to the refined metal price, so traders are reluctant to import,” Tao Yonghe, general manager of Guangdong Qingyuan, said in an interview today. The company is a unit of Aluminum Corp. of China, the nation’s biggest producer of the light metal.

Recycled copper accounts for about 35 percent of China’s total refined output, and 60 percent of scrap supply is from imports, according to the company, which has a recycling capacity of 100,000 tons per year.

--Helen Sun. Editors: Richard Dobson, James Poole

To contact the Bloomberg News staff on this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus