Copper Imports by China at Record on Re-Stocking, Trade Financing Demand
China December Copper Imports at Record on Demand, Financing
Kevin Lee/Bloomberg
China’s copper consumption growth will slow to 6.4 percent this year, or 7.85 million tons, according to Beijing Antaike Information Development Co.
China’s copper consumption growth will slow to 6.4 percent this year, or 7.85 million tons, according to Beijing Antaike Information Development Co. Photographer: Kevin Lee/Bloomberg
Copper imports by China surged to a record in December, narrowing the first annual drop since 2008, as pre-holiday stockpiling and financing needs spurred buying amid low domestic inventories in the world’s largest consumer.
Inbound shipments of the refined metal, copper alloy and products were 508,942 metric tons, gaining for the seventh straight month, according to data on the General Administration of Customs’ website today. That was the highest level ever, according to Qu Yi, a Beijing-based analyst at CRU International Ltd.
Tight credit conditions after China raised bank reserve ratios six times in 2011 spurred metal imports as a means to secure trade financing. Unprofitable arbitrage between London and Shanghai in the first half caused a 29 percent drop in inventories as users ran down local stocks. The benchmark copper price in London tumbled 21 percent last year.
“December imports far exceeded the market expectation,” Peng Qiang, an analyst at Cofco Futures Co., said by phone from Beijing. “The consensus was around level with November, or even slightly lower. This may be a combined result of actual demand and financing needs.”
Arrivals of unwrought copper fell 24 percent in the first six months from a year earlier as the arbitrage window closed, spurring a rebound in the second half, paring the annual decline to a 5.1 percent drop. Arbitrage traders attempt to profit from prices variations for the same asset traded on different exchanges.
Three-month copper on the London Metal Exchange gained as much as 1.5 percent today to $7,609.50 a ton, before being traded at $7,595 per ton at 2:48 p.m. Shanghai time.
Financing Demand
“Expectations of loosening money supply this year encouraged financing deals, as traders would deem such deals safer when overall cash flow isn’t that tight,” Peng said.
Trading companies receive a letter of credit for copper imports and then get a window of a few months of cheap loans. They can sell the metal and use the proceeds for higher-yielding investments, or submit a warehouse receipt or a warrant to use it as collateral for a discounted loan.
China cut reserve requirements in December by 50 basis points, the first reduction since 2008. The People’s Bank of China may follow up last month’s reduction with another cut this week, JPMorgan Chase & Co. said yesterday.
Improving demand ahead of the Chinese New Year holiday may also have boosted shipments, Peng said. The weeklong vacation starts on Jan. 23.
More Imports
Low stockpiles and tight financing conditions may support imports this year, said CRU’s Qu. “If prices slide further, and if money supply loosens a tad, imports may pick up.”
China’s stocks rose, driving the benchmark index to its biggest three-day gain since October 2010, as slowing trade data boosted speculation the government may loosen monetary policy to spur economic growth.
China’s copper consumption growth will slow to 6.4 percent this year, or 7.85 million tons, according to Beijing Antaike Information Development Co. This compares with 8.5 percent growth in 2011 to 7.38 million tons, and 11.5 percent to 6.8 million tons in 2010, Antaike’s data show.
“For January, holidays and low utilization rates of producers will probably bring down imports from the record level in December,” said Wang Mingyi, an analyst at Galaxy Futures Co.
Scrap copper imports totaled 450,000 tons in December, lifting the annual arrivals to 4.69 million tons, up 7.4 percent from 2010, according to customs.
To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
Rate this Page