Copper Poised to Set New Record on China Imports, ETF Launch, Antaike Says-Shanghai Metals Market

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Copper Poised to Set New Record on China Imports, ETF Launch, Antaike Says

Industry News 03:17:49PM Dec 22, 2010 Source:SMM

Dec. 22 (Bloomberg) --Copper may rally to new records as China imports more of the metal in the first quarter and the launch of exchange-traded products locks up physical supplies, said an analyst at Beijing Antaike Information Development Co.

"Copper is in an upward trend, so new records can be expected,” Yang Changhua, a senior analyst at the metal researcher, said by phone from Beijing today. "The global supply shortage offers fundamental support, and money continues flowing in amid investment demand,” said Yang, who has been doing copper research in China for 15 years.

The metal reached a record $9,392 a metric ton yesterday on the London Metal Exchange as Chinese imports rebounded and an accident at the world’s third-largest copper mine curbed supplies. The International Copper Study Group is expecting a 435,000-ton deficit in the refined metal next year.

"The market is very sensitive to positive news right now, showing a typical bull market feature,” Everbright Futures Co. said in a research report today.

China, the world’s largest consumer, shipped in 232,298 tons of refined copper last month, up 37 percent from a one-year low in October, customs data showed. Anglo American Plc and Xstrata Plc’s Collahuasi venture in Chile declared force majeure after three workers died when a ship-loader at Patache port collapsed on Dec. 18.

The three-month contract has gained 27 percent this year in London, and traded little changed at $9,360 a ton at 1:30 p.m. in Singapore.

"Imports in the first quarter, especially in February and March, should be higher than the lows in the past couple of months,” Yang said. "Although local prices are now lower than London, imports for financing purposes are rising.”

ETF Impact

The London Stock Exchange launched the world’s first exchange-traded products backed by copper, nickel and tin on Dec. 10, as ETF Securities Ltd. sought to meet demand to invest in industrial metals. JPMorgan Chase & Co. and BlackRock Inc. said in October they planned to introduce copper ETFs next year.

"Essentially, to launch an ETF product is to drive up the prices of the underlying physicals,” Yang said. "It locks up, or ‘consumes’, a large amount of existing supplies.”

Actual consumption growth of copper by China will slow next year to around 8 percent from 11.5 percent this year. Cables and home-appliances, which have been supporting the demand, will continue to play a major role, said Yang.

China’s spending on a national power grid may account for 50 percent of the increase in its overall copper demand next year, Macquarie Group Ltd. said in a report on Dec. 7.

Trade Financing

As Beijing tightens liquidity in an attempt to ease the highest inflation in more than two years, borrowing costs are rising. To secure financing, trading firms apply for letters of credit for copper imports. The companies then get a window of about 90 days of almost free credit, and can pay back the funds after they sell the products.

Traders can either sell the metal onto the local market if prices catch up with London, or ship it out to nearby LME warehouses if that is profitable, according to Yang.

Stockpiles in London Metal Exchange warehouses may rise as traders in China re-route metal previously intended for imports, said Jeremy Goldwyn, who overseas business development in Asia for London-based Sucden Financial Ltd. on Dec. 16. This will probably continue into early February, according to Goldwyn, who has been in the metals business for more than 20 years.
 


 

Copper Poised to Set New Record on China Imports, ETF Launch, Antaike Says

Industry News 03:17:49PM Dec 22, 2010 Source:SMM

Dec. 22 (Bloomberg) --Copper may rally to new records as China imports more of the metal in the first quarter and the launch of exchange-traded products locks up physical supplies, said an analyst at Beijing Antaike Information Development Co.

"Copper is in an upward trend, so new records can be expected,” Yang Changhua, a senior analyst at the metal researcher, said by phone from Beijing today. "The global supply shortage offers fundamental support, and money continues flowing in amid investment demand,” said Yang, who has been doing copper research in China for 15 years.

The metal reached a record $9,392 a metric ton yesterday on the London Metal Exchange as Chinese imports rebounded and an accident at the world’s third-largest copper mine curbed supplies. The International Copper Study Group is expecting a 435,000-ton deficit in the refined metal next year.

"The market is very sensitive to positive news right now, showing a typical bull market feature,” Everbright Futures Co. said in a research report today.

China, the world’s largest consumer, shipped in 232,298 tons of refined copper last month, up 37 percent from a one-year low in October, customs data showed. Anglo American Plc and Xstrata Plc’s Collahuasi venture in Chile declared force majeure after three workers died when a ship-loader at Patache port collapsed on Dec. 18.

The three-month contract has gained 27 percent this year in London, and traded little changed at $9,360 a ton at 1:30 p.m. in Singapore.

"Imports in the first quarter, especially in February and March, should be higher than the lows in the past couple of months,” Yang said. "Although local prices are now lower than London, imports for financing purposes are rising.”

ETF Impact

The London Stock Exchange launched the world’s first exchange-traded products backed by copper, nickel and tin on Dec. 10, as ETF Securities Ltd. sought to meet demand to invest in industrial metals. JPMorgan Chase & Co. and BlackRock Inc. said in October they planned to introduce copper ETFs next year.

"Essentially, to launch an ETF product is to drive up the prices of the underlying physicals,” Yang said. "It locks up, or ‘consumes’, a large amount of existing supplies.”

Actual consumption growth of copper by China will slow next year to around 8 percent from 11.5 percent this year. Cables and home-appliances, which have been supporting the demand, will continue to play a major role, said Yang.

China’s spending on a national power grid may account for 50 percent of the increase in its overall copper demand next year, Macquarie Group Ltd. said in a report on Dec. 7.

Trade Financing

As Beijing tightens liquidity in an attempt to ease the highest inflation in more than two years, borrowing costs are rising. To secure financing, trading firms apply for letters of credit for copper imports. The companies then get a window of about 90 days of almost free credit, and can pay back the funds after they sell the products.

Traders can either sell the metal onto the local market if prices catch up with London, or ship it out to nearby LME warehouses if that is profitable, according to Yang.

Stockpiles in London Metal Exchange warehouses may rise as traders in China re-route metal previously intended for imports, said Jeremy Goldwyn, who overseas business development in Asia for London-based Sucden Financial Ltd. on Dec. 16. This will probably continue into early February, according to Goldwyn, who has been in the metals business for more than 20 years.