SHANGHAI, Jan. 28 (SMM) –
According to China Customs, China imported a record high 935,300 mt (physical content) of copper concentrate during December, up 12.47% MoM and 66.18% YoY.
During 2012, China's copper concentrate imports were low at first, but continuously hit record highs since August largely for three reasons.
First, the SHFE/LME copper price ratio remained extremely unfavorable for imports and only began improving at mid-year. The average losses for imported copper reached RMB 2,800/mt during 1H 2012, well above the average RMB 1,000/mt during 2H 2012. High losses compelled domestic copper smelters to consume existing stocks or buy domestic copper concentrate, while executing long-term contracts for imported copper concentrate. Once the SHFE/LME copper price ratio began improving and TC/RC for imported copper concentrate increased, domestic copper smelters became more interested in importing copper concentrate during 2H 2012.
Second, since a large number of copper smelters will increase crude smelting capacity in 2013, some smelters chose to increase copper concentrate imports during the last month of 2012. SMM estimates that as much as 1.35 million mt in new capacity will come online during 2013.
Third, adjustments in feeding processing trade for copper concentrate also increased refined copper sales in overseas markets given the falling SHFE/LME copper price ratio. This in turn helped boost imported copper concentrate consumption at copper smelters. Based on detailed import data, the amount of copper concentrate through feeding processing trade accounted for 15% of total imports during November and should increase in the future.
According to China Customs, China's refined copper imports during December were 238,800 mt, down on both a MoM and YoY basis. In December, Codelco set the 2013 term copper premium for Chinese customers at USD 98/mt, which was down from the 2012 level, but still higher than market expectations. This had little influence, however, on spot copper premiums, which remained relatively low at USD 62/mt, reflecting limited market demand for imported copper. With the domestic discount rate falling slightly, the demand for using copper as a financing vehicle will likely weaken, and when combined with the lack of significant demand for Chinese copper, refined copper imports will fall further in January.