Top China Copper Trader Says Second-Half Slump Stalks Market

  • Maike Metals founder sees weaker world growth hitting metals
  • He Jinbi joins Codelco, Goldman Sachs in bearish copper call

One of China’s biggest copper traders expects the metal to sink in the second half as demand ebbs in the world’s biggest consumer amid a slowdown in global growth.

He Jinbi, founder and president of Xi’an Maike Metals International Group, joins Codelco, the world’s biggest copper miner, and Goldman Sachs Group Inc. in predicting the metal’s advance from a six-year low won’t last. Prices, which traded above $5,000 a metric ton this month, will average between $4,200 and $4,300 this year, He said in recent interviews.

“Demand for the second half might not be good and we may face some risks from the global markets,” He said at the Shanghai office of the company he founded in 1993. Maike has a joint venture, HFZ Capital Management Ltd., with Red Kite Group, one of the biggest metals hedge funds.

China, the world’s biggest commodities consumer, is poised to grow at its slowest in decades and reported this month that industrial production rose at the weakest pace since the 2009 recession. New floor space being built dropped 11.4 percent last year amid a housing glut and Goldman Sachs forecasts copper may drop to $4,000 a ton in the next 12 months as the nation’s demand growth is unlikely to be sustained.

‘Remains Weak’

“The property industry in China remains weak, with falling investment and fewer new projects, so we can can hardly expect big growth even if basic demand remains stable,” said He. Demand growth of one or two percent for the year would be “acceptable”, he said. Copper consumption in China grew about 3.9 percent year, according to commodities researcher CRU Group.

Materials including iron ore and copper have rallied since mid-January amid restocking, a squaring of short positions across commodities markets and on indications that China’s government may take more steps to shore up the economy. Copper slumped at the start of 2016 to touch a six-year low on Jan. 15.

Import Volumes

Codelco Chairman Oscar Landerretche this month said copper’s rally will fade amid a surplus, while Citigroup Inc. also is bearish and sees prices moderating in the second quarter. To be sure, others are more positive. Ivan Glasenberg, chief executive officer of Glencore Plc, pointed on Mar. 1 to healthy Chinese import volumes as evidence the worst is over for commodities.

“There are two reasons for the stronger imports,” said He, who first bought copper from overseas in 1997. “Firstly, Chinese smelters have been cutting back production since the end of last year. Secondly, copper consumption is stronger at the moment.”

He noted that prices slumped last year even though Chinese demand was still growing, and imports for the full year were higher.  “People in the industry are more bearish on commodities this year because of slowing global economic growth. In China, users still need to consume copper whether prices are rising or falling.”

Maike, based in He’s home city of Xi’an in Shaanxi province, western China, can profit from price movements and makes money from differences between world prices and those in China. He said financial stress for commodities firms is a chance for bigger trading companies, including his own, to grow further as credit conditions force others from the market.

“We are not a miner so we didn’t see any asset write downs during the price collapse,” said He, who declined to give information about the company’s revenues, profits, or sales volumes. “As a trading house, we are focusing on price differentials, and lower copper prices offer more opportunities for China.”

— With assistance by Martin Ritchie

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