China Cu Import Data Analysis in February

SHANGHAI, Mar. 19 (SMM) –

Scrap Copper
According to China Customs, China's imports of scrap copper in February were 400,000 mt, up sharply by 74.7% MoM and up 62.8% YoY. The significant increases in scrap copper imports during February were in line with SMM's previous prediction and mainly due to time factor of the Chinese New Year holiday, which fell in January this year, but February last year. 

The recently unfavorable SHFE/LME copper price ratio has resulted in heavy losses for scrap copper importers, causing imports of high-quality scrap copper to fall. China's scrap copper imports for March will likely fall as well, to around 380,000 mt.

Unwrought Copper and Copper Semis
According to preliminary data from China Customs, China's imports of unwrought copper and copper semis in February were 484,600 mt, up 17.1% MoM and 105.8% YoY, record highs.

Overall copper semis demand was low despite an improvement in downstream consumption, so SMM believes refined copper imports accounted a large proportion of February's total imports, at around 390,000 mt. The SHFE/LME copper price ratio has been falling since mid-January, and importers were now incurring losses of RMB 3,000-4,000/mt. However, from China Customs data for February, China's demand for imported copper remains robust for a number of reasons. First, traders in February began to execute 2012 long-term imported copper contracts and the volume of contracts is higher than 2011. Despite an unfavorable SHFE/LME copper price ratio, imported copper was still arriving in stable quantities. Second, the demand from using imported copper as a financing vehicle is still high due to high domestic capital costs. 

It is worth noting, however, that imported copper arriving at ports immediately was placed into bonded warehouses given considerable losses for copper importers and current sluggish domestic consumption. Considering the high inventory risks, financing demand should weaken in the near term. In addition, the SHFE/LME copper price ratio will not likely improve over the near term, so SMM expects China's refined copper imports will fall in March.