China Copper Supply Seen Drying Up

Asian metals traders and producers, having waited more than three months for China to come back to the world copper market, sounded a hopeful note on Monday that China's copper stocks were falling.

Healthy demand for copper products such as rod and wire were seen trimming stocks, a producer source said. "They are consuming all they bought last year," the source said.

The official Chinese media has reported a stockpile of 170,000 tonnes of copper left over from 1996 imports. "That's 15 percent of total consumption so it shouldn't be more than a couple of months before it is used up -- we should have gone over that already," he said.

 

A South Korean trader said demand for imported copper rod in Shenzhen, the special economic zone just over the border from Hong Kong, was 5,000 tonnes a month.

Total annual Chinese demand for imported copper rod was 200,000 tonnes, he said.

End users in Shenzhen were paying a premium of $220-230 a tonne on their rod imports over the cash London Metal Exchange (LME) copper price, he said. Three months copper settled on the LME on Friday unchanged from Thursday's kerb close of $2,360 a tonne. London markets were closed on Monday and will re-open on Tuesday.

As LME copper prices continue to trade sideways, traders in Asia said they expected China to start buying sooner rather than later.

Construction and infrastructure projects on the booming eastern seaboard continue their rapid pace, although Chinese and Western sources said money remains tight.

"The government will not release money for copper buying," a Shanghai copper trader said. Small parcel arrivals at southern ports indicated spot demand and some speculator interest, traders said.

Even though the market is still "quiet to the point of being relaxed," a trading source said, China's copper demand should outstrip economic growth.

China's gross domestic product (GDP) grew 9.7 percent in 1996, and was 9.4 percent in the first quarter of 1997.(Reuter)

All the physical fundamentals are there for them to be consuming in excess of GDP growth," the trading source said.

"The upper potential is huge. When everyone comes into the market -- and they have to come -- there will be no inventories. There will be huge buying and the spike in the price is going to be significant," he said.

Aluminium prices on the LME were, like copper, seen as too high for Chinese buying, a trader in Beijing said.

The LME price closed on Friday down $4 at $1,624 per tonne.

Cheaper domestic prices were seen keeping Chinese buyers away from the international market because imports carried hefty taxes, traders said.

The Shanghai Metal Exchange May aluminium closed on Monday at 15,400 yuan, or $1,855, per tonne.