SRB More Likely to Buy Nickel, Less Likely to Purchase Copper

SHANGHAI, Jun. 5 (SMM) – Rumor is circulating that the State Reserve Bureau (SRB) will purchase nickel and copper. Smelters and traders polled by reporters, however, say they have not yet received notices on bid invitation from the SRB. Rumor on SRB’s metal buying did help push LME nickel up nearly 3% on Monday. Copper prices and shares of copper companies, however, failed to be lifted, with copper companies reporting declines in shares yesterday.  

It was rumored that the SRB will buy 30,000 mt of nickel. Many market players believe the rumor may probably be true. According to Xu Xuebin, an analyst, nickel prices are now quite low following two years of continuous declines. As such, now is the good timing for the SRB to purchase nickel. LME nickel prices have slid from USD 29,300/mt back in early 2011 all the way down to USD 15,185/mt, a plunge of nearly 50%.

Xu Xuebin added that even if the SRB does buy nickel, any lift on nickel prices should be transitory. The 30,000 mt of nickel likely to be bought is only a fraction of current LME nickel inventories, which are now around 180,000 mt. Besides, nickel consumption has shown no signs of significant improvement. Consumption by traders is sluggish, while electroplating factories and nickel processing plants are purchasing only on an as-needed basis. In this context, nickel prices should continue to fall in the medium term. 

It is also speculated that the SRB will buy copper. However, many smelters and traders told reporters that they have received no such news. A senior industry insider notes that the likelihood of the SRB buying copper is slim for two reasons. First, copper prices are still considered high at the moment. Prices for the most active SHFE copper contracts are approaching RMB 53,000/mt. The SRB did not buy copper even in late April when copper prices retreated from RMB 50,000/mt, which means it is unlikely that the SRB will purchase copper right now when copper prices are higher. Second, many smelters have received no news on SRB’s copper purchasing. If the SRB plans to purchase copper, smelters will know in advance.   

Rumor surrounding the SRB’s copper purchasing exerted little influence on financial markets. Shares of Jiangxi Copper Corporation and Yunnan Copper shed 1.1% and 1.28%, respectively on Tuesday. (Edited by SMM)