China's Copper Imports May Rise as Stockpiles Rebuilt (Update4)
By Xiao Yu and Xiaowei Li
Jan. 10 (Bloomberg) -- China, the world's largest copper consumer, may rebuild stockpiles as prices of the metal drop, boosting imports, according to a survey yesterday of seven analysts, traders and processors.
Prices of $5,100 a ton may prompt renewed imports by Golden Dragon Precise Copper Tube Inc., said Lu Chenghong, a trading manager at the world's biggest maker of copper tubing. China's purchases overseas would ``pick up considerably'' in the coming months, he said.
Prices have slumped 36 percent from all-time highs touched in May amid concern growth in the U.S., the world's second- largest user, is cooling, reducing demand for the metal, especially in housing. Shipments of refined copper into China declined 36 percent from January to November last year compared with 2005, according to data from the nation's customs office.
``Common Chinese wisdom is rather than buying when prices are going up, to buy when they are going down,'' said Li Zhifeng, a trading manager at the copper unit of the nation's biggest metals trader, China Minmetals Nonferrous Metals Co. Still, Chinese companies may wait till the prices drop still further before making substantial purchases, Li said.
Copper futures on the Shanghai Futures Exchange, the nation's benchmark contract, touched a record 84,100 yuan ($10,775) a ton on May 15. Since then, they've tumbled 35 percent to settle at 54,250 yuan today. Chinese prices include 17 percent value-added tax and 2 percent import duty.
`Close to Zero'
``Our inventories are close to zero, and most other processing plants are in a similar condition,'' said Zhang Xuefeng, head of futures trading at Chinalco Luoyang Copper Co.
On the London Metal Exchange, the world's largest such bourse, three-month futures touched a record $8,800 a ton on May 15. They ended at $5,625 a ton yesterday, 36 percent below their peak and down 11 percent this year.
The volume of London Metal Exchange stockpiles bought and due for delivery, referred to as canceled warrants, has almost tripled since Jan. 3 to 17,225 tons, with most increases from Asian warehouses. Most of the canceled warrants are bound for China, said Golden Dragon's Lu, who added that importers now benefited from profit margins of about 2,000 yuan a ton.
Copper processors in China used more than 250,000 tons of the metal that was stockpiled at their plants or warehouses last year, according to Yang Changhua, an analyst at Beijing Antaike Information Development Co., which advises the government on industry policies.
Rising Demand
Demand may rise to 4 million tons in 2007 from 3.8 million tons last year as China maintains strong economic growth and builds more power grids and other infrastructure, Yang said. Copper is used in air-conditioners, electric wires and cables.
The nation's economy may expand 9.8 percent in 2007, according to a Dec. 22 report by the Chinese central bank's research unit. The economy may have grown 10.5 percent last year, it said, fueled by rising investment in roads and buildings.
Chinese buyers may return to the market after Chinese New Year, which falls on Feb. 18, to meet an expected seasonal rebound in demand that starts in March, said Chris Ding, a metals analyst at China International Capital Corp., in Beijing.
Copper prices may fluctuate between $4,500 and $6,500 a ton this year, and increased buying from China may help prices move toward the higher end of that range, Ding said.
Inventories of copper in Shanghai have almost halved since the start of 2006 as users drew down stockpiles as imports fell, according to data from the Shanghai Futures Exchange.
At the same time, China's imports of scrap copper in the first 11 months of 2006 rose 1.2 percent to 4.5 million tons. Scrap copper is recycled to make copper products, and can be used as a substitute for copper concentrate, the raw material that's used to make refined copper.
To contact the reporters on this story: Xiao Yu in Beijing at yxiao@bloomberg.net ; Xiaowei Li in Shanghai at xli12@bloomberg.net
Last Updated: January 10, 2007 02:48 EST
