China's Copper Imports at 10-month High in July as LME Warehouse Incentives Disappear

SHANGHAI, Aug. 21 (SMM) - China’s copper imports climbed to a 10-month high in July, partly due to disappearing London Metal Exchange warehouse incentives in places like Johor, Shanghai Metals Market (SMM) has learned.

Inbound shipments of refined copper rose by 5% month-on-month to 292,000 tonnes last month, the highest since September 2012, customs data showed today.

This high level of imports is expected to continue for the next a couple of months partly because disappearing LME warehouse incentives are enabling more metal to flow to China.

Operating companies of LME warehouses are cutting or cancelling subsidies for storing metal after LME announced on July 1 a proposal to introduce significant new rule changes intended to break the logjam of metal in its warehouses.

In addition, SMM attributes the rise in imports to the following three factors:

1. Demand for finance-driven copper imports remained as no significant easing of liquidity condition was felt in China. Moreover, capital costs remained high after some banks put off loan issues and discount rates for acceptance bills rose above 6%;
2. As banks have tightened controls over issuance of L/Cs used for importing, copper available for financing deals has become limited, increasing demand for new imports;
3. Spot premiums for imported copper remained high, peaking above $200 in July, attracting overseas material to flow to China;