China Hawks Copper, May Sell More On Good Price

China has started selling copper on the back of a strong rally on the London Metal Exchange (LME), and may peddle more if the price of the red metal keeps climbing, base metal dealers saidon Friday.

"They (the Chinese) are selling quite aggressively," Vinod Kumar, director of Singapore-based metal company Donald Mcarthy said. "They feel the LME will move higher so most of them are waiting for it to move up," he added.

Kumar said his company handled "quite some quantities" of copper sold by China over the past few days, and will probably do so again if prices do not pull back from their high levels. "In China, the (local) demand is poor. They have to sell the material," he said. "They are selling at a fixed price rather than the LME base price."

 

"China is both buying and selling copper. It's a game to them since it's state money. But I'm not sure why they are buying at these high levels," another dealer said. "I'm sure they're selling futures," a senior trader added. "The price is surely attractive."

However, some dealers say the volume of Chinese sales are not at a level that would usually be the case with prices touching 13-month highs on Thursday afternoon at US$2,609 a tonne. LME copper eventually closed $19 up on the day at $2,580. "The Chinese are selling, but they're obviously buying back material. I don't know why they are doing it. Buying back is strange," one dealer said.

A Japanese dealer speculated that the Chinese buying is fueled by expectations that domestic prices of copper in China will rise further with the red metal currently fetching a yuan price equivalent to between $2,800 to $2,900 a tonne.

But one trader disagreed and said that with duties imposed by the government, a metal company there would not make money on that kind of a deal. "It doesn't make sense. They're losing money by buying back," he said. Another trader speculated that China has altered its buying pattern and decided to import more concentrates this year "in order to refine their own material."

China was said to have imported around 8,50,000-8,60,000 tonne of copper concentrates last year. "They've obviously overbought. Rather than ship it back, they've decided to consume it internally," a dealer said. A parcel of 5,000 tonne of copper on LME warrant in Singapore is being exported to China on Saturday after it was sold to a Chinese trader, sources said. They said the deal was done by two firms, with one selling 2,500 tonne at a premium of between $10-$15 a tonne over LME cash price just before the recent rally in exchange prices.

The sale is expected to be reflected in LME stocks data for the Singapore warehouse later on Friday. The exchange reported 19,250 tonne of copper was held in the Singapore warehouse on Thursday. Chinese sellers are also offering zinc at low premiums to LME cash price after storing large quantities of the metal in warehouses in the city-state. (Reuter)