China Seen Playing Games On World Copper Market

China could be playing games on the world metal market, trying to push prices down with the announcement on Tuesday of plans to deliver up to 10,000 tonnes of copper to London Metal Exchange (LME) warehouses, traders said. "They are playing games," a Chinese trading source said.

"The Chinese have been on the LME for many years, they know how the game is played," he said. "What purpose does it serve to say publicly that you are going to add to the market unless the intention is to push the price down?" China would deliver between 8,000 and 10,000 tonnes of copper to LME warehouses in Singapore over the next month, an official of Beijing's Central Metals Trading Corporation said in Singapore.

 

The deliveries would be made because the domestic Chinese price is low and the international price, at around $2,600 a tonne fob, is high, the official of China National Nonferrous Metals Import and Export Corp (CNIEC) told Reuters. "That sort of metal is not really significant and I don't know that 8,000-10,000 tonnes would put that much pressure on the market," said a Singapore trader, adding that LME copper had only risen slightly since the announcement.

In early pre-market trading, LME copper prices maintained Monday's upward momentum with some light speculative buying lifting prices to $2,602 a tonne, up $14 from the afternoon kerb close. Suggestions by some Far East traders that CNIEC was short in the market carried little weight. "As a country, they will be net long," one trader pointed out. Most traders said the Chinese sales were a speculative attempt to knock prices down.

Small parcels of Chinese copper have been reportedly offered to the market as the LME price has hit year-highs around $2,600 in recent weeks, although most of the material was unregistered, and thus undeliverable to the LME. An official of CNIEC's copper department in Beijing said the company would be collecting registered material from major producers for delivery to the LME.

This material would be replaced with unregistered material from China's central stockpile, the official said. LME registration is an internationally accepted indication of quality and reliability.

China preferred to sell its copper direct to end-users, the CNIEC official said, but the regional market, namely Japan and South Korea, was flat and Europe seemed the better option. "We have to consider exports to Europe, and the LME is the best way to do that," he said by telephone.

With domestic prices low in relation to the international price, China had to consider ways to take advantage of the situation, he said. The Chinese copper, to be delivered between now and July from Shanghai and Guangzhou, would go to the spot market, the official said, adding the sooner it was sold the better. The physical price of copper in the Shanghai area, China's most active region for metals consumption, was around 22,750 to 22,800 yuan ($2,741-2,747) per tonne, including freight and transport, traders in the city said. (Reuter)