Interview: New Rule on China Customs Manifest Pushes Up Copper Premiums?

SHANGHAI, Jun. 18 (SMM) – Several shipping companies lately released notices that China's General Administration of Customs (GAC) will implement on June 30 a new Customs manifest rule which requires carriers shipping containerized cargo to China to submit manifest to Customs 24 hours before cargos are loaded at the port of loading. The new rule is said to take effect in advance in Shanghai on June 28.

Although the GAC has not yet issued any official announcement on the rule change, some market players say the implementation of the new rule will buoy copper premiums in Shanghai, since it will slow the pace for imported copper to enter China’s physical market, tightening copper supply.

As the news came out at the same time when copper prices on the Shanghai Futures Exchange (SHFE) posted continuous rallies, SMM ran an interview with several industry analysts, in a bid to find out the reasons behind the price hikes.

Xi Zhengkan from CES Capital International believes the introduction of the new manifest rule will affect financing trades, but may help narrow losses for copper imports. However, Xi holds that SHFE copper prices will still be subject to China’s economy, including progress on construction projects and further developments in housing market.

Fang Junfeng from Shanghai CIFCO considers higher copper premiums in the Shanghai market, solid support at the 47,220-yuan-per-tonne level, and upbeat industrial data out last Friday, as well as low copper stocks in China were the major drivers of the recent copper price rises. That said, Fang did note that the change in manifest rule resulted in tighter physical goods supply and contributed to a higher copper premiums in Shanghai’s physical markets.

Fang expects copper prices to remain weak but with limited downward room as SHFE copper still outperformed LME copper and as SHFE copper stocks fell another 4,571 tonnes to 81,929 tonnes last week.

Ruida Futures’ Lin She attributs the stronger SHFE copper mainly to restored confidence in China’s economy and fading influence of Qingdao’s probe into lending irregularities involving port stocks. Above-expected economic indicators for May and the PBOC’s move to cut RRR for “targeted banks” shored up market morale.

Lin says copper premiums will be briefly boosted in June due to report on Customs’ new regulation for cargo manifest, but points out that falling LME copper prices and increasing short bets in Comex copper, as well as the onset of offseason may impose a ceiling on any rise in copper prices.

Zhang Ao from Minmetals Futures tells SMM that the new rule for Customs manifest is unlikely to exert great influence on SHFE copper prices. Although the new rule will limit the number of copper imports entering Chinese market over the short term, Zhang believes that some importers could hedge the risk in futures markets.  

Edited by SMM