- State reserve purchases bolster local prices spurring imports
- Inbound shipments in first quarter climb 30% from year earlier
China’s imports of copper climbed to a record in March after domestic buying by the state reserve helped support prices in the biggest consumer and encouraged foreign purchases ahead of the peak demand season.
Inbound shipments of unwrought copper and products rose for the first time this year, increasing 36 percent on month to 570,000 metric tons, according to China’s customs administration Wednesday. Purchases soared 30 percent to 1.43 million tons in the first quarter from a year earlier, customs data show.
Demand for metals in China, the world’s second-biggest economy, picked up after the Lunar New Year in February as officials pledged to support economic growth. The state reserve bought 150,000 tons of copper at the start of January to soak up domestic supply as prices traded near the lowest since 2009, people with knowledge of the purchase said at the time. China’s overall trade performance improved in March, showing the economy is stabilizing.
“There was more buying for inventories after the New Year holiday in February,” Jia Zheng, chief metals analyst at East Asia Futures Co., said by phone from Shanghai. “State reserve purchases from domestic smelters boosted prices and made imports more profitable.”
Shipments increased because of a strong differential between domestic and overseas rates in January, a general appetite to hold hard assets as a hedge against yuan depreciation and expectations that demand would improve, Citigroup Inc. said in a note Wednesday. A combination of arbitrage and prospects for a weaker yuan have pulled in tonnage along with use of the metal as collateral to obtain financing, according to Macquarie Group Ltd., before the latest data were released.
The surge in imports may deepen concerns about oversupply in China. The country, which uses more than 40 percent of the world’s copper, accounts for almost 80 percent of stockpiles after buying boomed late last year, according to Goldman Sachs Group Inc. While bulls say hoarders see bargains, bears say the buildup shows demand weakness as China moves to a consumer economy.
Inventories tracked by the Shanghai Futures Exchange more than doubled this year and climbed to a record 394,777 tons on March 17, while stores monitored by the London Metal Exchange have slumped 38 percent since the start of January and are less than half those followed by the bourse in Shanghai.
Stockpiles in China’s bonded warehouses jumped to the highest level in seven months in March, rising 34 percent from a month earlier, according to a survey of 12 bonded warehouses, copper traders and other industry participants by Bloomberg Intelligence analyst Yi Zhu.
While imports of ore and concentrate fell 6.2 percent to 1.37 million tons on month, for the quarter they surged 34 percent on year to 4 million tons, the data showed, a sign smelters are sustaining local production of refined metal.
The jump in imports probably won’t last, said Jia from East Asia Futures. Purchases are set to decline from this month amid record inventories and as seasonal demand slackens, Jia said.
Helen Lau, an analyst at Argonaut Securities (Asia) Ltd. in Hong Kong, said the buying was to replenish stockpiles before peak demand in the second quarter and that demand was probably not sustainable. Unfavorable import differentials in March also suggest purchases will decline, she said by phone.
— With assistance by Winnie Zhu