(Adds analyst’s comments in fourth paragraph.)
Oct. 13 (Bloomberg) -- Refined copper inventories in China climbed to a record 1.9 million metric tons, or about three months of consumption, by the end of last year, as buying picked up after a slump in prices.
The stockpiles included 131,891 tons in Shanghai Futures Exchange-monitored warehouses, bonded warehouses, China’s state reserves, and metal held by producers, consumers and trading firms, said Bian Gang, deputy director of the China Nonferrous Metals Industry Association’s International Coordination Department.
China, the biggest producer and consumer of the refined metal, rarely discloses the estimates of state reserves and commercial inventories. The State Reserve Bureau reportedly bought copper in 2009 after prices slumped to under $3,000 a ton amid the worst global recession since the Great Depression.
“Most of the inventories should belong to state reserves, and they won’t be easily released onto the market,” said Cai Luoyi, head of research department at Shanghai CIFCO Futures Co. “The reserves may be a result of stockpiling after the price tumbled in 2008.”
China International Capital Corp., China’s largest investment bank, Macquarie Group Ltd. and BOC International Co. in early 2009 suggested the state reserve may take advantage of the slump in copper prices to build up holdings. The reserve bureau may raise purchases to 1 million tons from 600,000 tons, according to CICC in a March 2009 report.
Copper, which reached a record $10,190 on the London Metal Exchange in February, sank to $6,635 on Oct. 3, a more than 14- month low. The contract traded at $7,375 by 2:45 p.m. Shanghai time, taking this year’s decline to 24 percent.
Total demand in China last year was 6.8 million tons, according to Beijing Antaike Information Development Co. Copper imports by China climbed to the highest level in 16 months in September as lower prices lured traders to place orders and after domestic stockpiles fell.
Prices may be supported by Chinese buying as imports pick up in coming months after destocking earlier this year and limited mine supply, Macquarie said in a Sept. 26 report.
It was estimated that about 300,000 tons of refined metal had been destocked from January to July this year and an additional 200,000 tons of metal contained in copper concentrates and scrap had also been cleared out from warehouses at smelters, traders and consumers, the report said.
Inventories of users and trading firms may be extremely low, CIFCO’s Cai said. Still, no one is stockpiling now because of the tight credit situation and purchasing will only be done on a “hand-to-mouth” basis, Cai said.
--Helen Sun. Editors: Richard Dobson, Jarrett Banks
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