Already a Bloomberg.com user?
Sign in with the same account.
South Korea, Asia’s third-biggest buyer of industrial metals, increased its 2012 spending plan for purchases by 9.4 percent as prices fell and domestic demand is forecast to climb, the head of a state agency said.
The state-run Public Procurement Service, which manages strategic commodities, will spend 580 billion won ($510 million), up from an earlier estimate of 530 billion won and up 60 percent from last year, Kang Ho In, 54, said in an interview in Daejeon.
The LMEX index of six metals including copper and aluminum has dropped 20 percent in the past year as Europe’s debt crisis and an economic slowdown in China, the biggest consumer, threatened to curb demand. South Korean demand may climb 7.5 percent to 3.2 million metric tons this year, the Korea Nonferrous Metal Association said March 30.
“Our main goal is to ensure stable supply for small companies,” said Kang, a former deputy finance minister. “Global fundamentals point to further drops in metals prices.”
The agency increased purchases since last year after declines in 2009 and 2010. The service has said it will raise annual spending to about 1 trillion won by 2015, targeting copper reserves for 80 days of demand from 60 days.
Copper may be supported as there is potential for increased consumption in the second half from infrastructure spending in China, Morgan Stanley said on June 28. The bank is predicting a 230,000-ton global shortfall of refined metal this year, the third straight annual deficit.
South Korea meets about 45 percent of its copper needs from overseas purchases and imports all of its aluminum. The nation consumed 755,316 tons of copper last year and 1.29 million tons of aluminum. Three-month copper on the LME fell 1 percent to $7,737.75 per ton at 12:40 p.m. in Seoul, while aluminum dropped 0.7 percent to $1,967.50 a ton.
The state service plans to buy 36,000 tons of aluminum, 15,000 tons of copper and 7,190 tons of four other nonferrous metals in the second half of this year, Kang said.
South Korea’s exports of goods ranging from cars to ships rose by a better-than-estimated 1.3 percent in June, snapping three months of declines, after a weaker won fueled overseas sales. Hyundai Motors Co. (005380), the nation’s biggest automaker, shipped 7 percent more cars overseas in June from a year earlier while domestic sales rose 0.1 percent.
“Demand for Korean cars and electronics goods has so far remained resilient in the global market,” Kang said. “We are not going to see any sharp drop in domestic consumption for metals.”
South Korea’s economy expanded at the fastest pace in a year during the first quarter, boosted by government spending and investments by semiconductor chipmakers. Still, the government on June 28 cut its forecast for this year’s growth and unveiled 8.5 trillion won of economic support measures, citing Europe’s “long-term threat” to the country’s expansion.
The agency, which meets 4.4 percent of the nation’s base- metal needs, expects to list an exchange-traded fund backed by copper on the local bourse late this month as part of efforts for joint-stockpiling with the private sector, Kang said.
“We will continue to build up stocks by buying when prices are lower,” he said. “At the same time, the copper ETF will not only help us meet our targets for state reserves but also offer individual investors an alternative investment tool.”
To contact the reporters on this story: Sungwoo Park in Seoul at firstname.lastname@example.org; Eunkyung Seo in Seoul at email@example.com
To contact the editors responsible for this story: Jarrett Banks at firstname.lastname@example.org