Business

Copper demand expected to rise

By Helen Sun (China Daily)
Updated: 2011-01-11 07:56

SHANGHAI - Copper imports by China, the world's largest consumer of the metal, declined in December, as lower domestic prices deterred purchases.

Shipments of copper and products fell 2 percent to 344,558 metric tons last month from 351,597 tons in November, the General Administration of Customs said on its website on Monday. Total imports in 2010 were little changed from a year earlier at 4.29 million tons.

Prices in London and New York gained to records this month on expectations that the global recovery will continue this year, boosting the demand outlook for the metal amid a widening global deficit.

"Arbitrage trade has been unprofitable for several months, so a decline isn't strange," said Tan Wentao, an analyst at HNA Topwin Futures Co. "Plus, I believe it is now very difficult to buy from London, as a dominant holder owns the majority of the stocks."

Arbitrage traders try to profit by buying the metal in London and selling it in Shanghai, exploiting a difference in prices. An unidentified company had 50 percent to 79 percent of the copper stocks in warehouses monitored by the London Metal Exchange as of Jan 5, according to the bourse data.

Three-month copper in London reached a record price of $9,754 a ton on Jan 4, and traded 0.4 percent lower at $9,380 as of 2:03 pm in Shanghai.

The metal used in wiring and cable gained 30 percent in 2010. The International Copper Study Group is expecting a 435,000-ton global deficit in the refined metal this year.

Still, "if you look at the history, the December figure actually isn't bad, especially considering the very high level of domestic production in recent months", said Fang Junfeng, an analyst at Shanghai CIFCO Futures Co. Some trading firms may have bought the metal amid speculation that the bull-run is likely to continue, Fang said.

China produced 4.37 million tons of refined copper in the January to November period, or 13 percent more from a year earlier, according to the National Bureau of Statistics. November output jumped to a record of 443,000 tons.

"I'd rather read today's imports data as a result of strong actual Chinese demand at the moment," Tan said.

"As arbitrage trade was impossible, what was left must come from the real consumption."

Stockpiles at the Shanghai Futures Exchange warehouses expanded to the highest level in more than six months, adding 275 tons to 132,166 tons last week, according to the bourse.

"It may take some time for the end consumers to get used to the record price," Fang said.

Chinese exports rose 18 percent to $154.2 billion from a year earlier and imports climbed 26 percent to $141.1 billion, both records, Monday's customs data showed.

"The data points to continued solid foreign demand, and very strong domestic demand," said Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole CIB.

China also imported 430,000 tons of scrap copper last month, data from the customs showed. Imports of aluminum and the metal's products were 82,927 tons in November.

Bloomberg News