Bloomberg News

China May Copper Imports Slump to 30-Month Low on Destocking

June 21, 2011

(Adds arbitrage prices in sixth paragraph. For a display of China’s metal trade data see CHME7<GO> CHME8 <GO> and CHME <GO> for menu)

June 21 (Bloomberg) -- Refined-copper imports by China tumbled to the lowest since level November 2008 as the biggest user continued destocking, lowering local prices and making it largely unprofitable to buy from overseas.

Inbound shipments dropped 47 percent from a year ago to 149,235 metric tons, down 6.9 percent from 160,236 tons in April, according to Bloomberg News calculations based on data provided by the General Administration of Customs. Exports declined to 20,175 tons from a record 44,595 tons in April.

Chinese fabricators drained inventories in exchange and bonded warehouses as a seasonal increase in demand from air- conditioner makers and expansion of power grids was supplied by higher domestic output. The usual summer lull, coupled with tight credit conditions in the nation, may curb any rebound of imports in the third quarter, analysts said.

“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.

Inventories Drop

Copper stockpiles monitored by the Shanghai Futures Exchange declined to a 21-month low of 82,309 tons on May 26. They rose to 87,310 tons last week. Inventories at bonded warehouses dropped to 300,000 tons to 350,000 tons from close to 600,000 tons two months ago, Zhao’s estimates show.

The metal for August delivery in Shanghai closed 1 percent higher at 68,250 yuan ($10,557) a ton. Including a 17 percent value-added tax in China, that’s $60 less than copper for delivery in three months on the London Metal Exchange, which last traded at $9,072.25 a ton.

Output of semi-finished copper products in May jumped 20 percent from a year ago to 979,000 tons, and the production in the first five months rose 15 percent on year to 4.11 million tons, according to the National Bureau of Statistics.

Imports of refined copper may fall 32 percent this year to 2 million tons, said Li Yusheng, an analyst at metals researcher Beijing Antaike Information Development Co. The forecast was cut from an estimate of 2.4 million tons made at the beginning of this year, according to Li.

Weak Rebound

“We expect imports in the second half to rise from the first half, but a jump doesn’t seem to be very likely,” Wu Jianjian, an analyst at Yong’an Futures Co., said from Hangzhou. “Because Beijing is determined to curb inflation, and as CPI growth remains fast, there is no sign now that it’s going to loosen money supply in the near future.”

China’s inflation rate climbed to 5.5 percent in May, exceeding the government’s 4 percent target, even as the People’s Bank of China has raised interest rates four times since September, and reserve requirement ratio nine times to a record of 21.5 percent for the biggest lenders.

The nation has missed its opportunity to stem inflation and may now risk a hard landing, billionaire investor George Soros said on June 14.

Monthly imports of unwrought copper, alloy and products may not exceed 350,000 tons, Jinrui’s Zhao estimated. “Fabricators may continue to use inventories in summer, if prices stay elevated,” he said.

--Helen Sun. Editors: Ovais Subhani, Richard Dobson

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

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


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