CHINA March 24 2014 5:35 PM
SHANGHAI (Scrap Register): Barclays thinks China’s net copper import requirement will rise 5% this year, made up of less refined copper and more concentrate as it ramps up domestic production.
Barclays expects further rotation in Chinese copper imports out of metal and into raw material this year. Domestic refined production is likely to ramp up strongly, taking advantage of improved concentrate supply from new mines and expansions and a stronger pricing incentive in the form of higher TC/RCs. Last year, they forecast an implied concentrate import requirement of 2.6Mt; the actual outturn was a bit higher at 2.78Mt (Less metal and more raw material for Chinese copper imports in 2013, 8 February 2013). For this year, the implied concentrate import requirement rises by a quarter to almost 3.4Mt (copper contained), which is a record increase in both percentage and tonnage terms.
By contrast, China’s refined copper import requirement could fall 15% to 2.3Mt due to a combination of much stronger domestic refined production, which we forecast to grow 16% this year, and slower demand growth, which we forecast to be 7%.
However, the actual outturn of refined copper imports will depend on the stocking cycle and price signals. For instance, in late 2013, China imported more refined copper than it needed, resulting in a build in stocks that has continued into early 2014.
Currently, the pricing signals (negative import arb), stocking cycle (high bonded stocks) and dented financing demand all suggest that refined copper imports could weaken sharply in the short term.
However, in our view, that does not mean China’s appetite for imported copper is diminishing in 2014. Indeed, quite the opposite: we expect China’s import requirement to rise a further 5%, but it will be driven by a thirst for raw materials over metal that will soak up a large portion of the expected growth in global mine supply, Barclays concluded.