SHANGHAI, Sept. 10 (SMM) – Expectations of increasing copper concentrate supply kindled concerns over a glut in refined copper market, which Shanghai Metals Market (SMM) believes will exert a drag on copper prices in the final quarter of the year.

With foreign copper mines ramping up production, copper concentrate supply is expected to grow sharply in the remainder of this year. In response, spot TCs have risen to $135 per tonne for clean concentrate by September 5, far beyond the $107.5 per tonne in early July.

                              Spot TCs for Clean Copper Concentrate 2014


The soaring TCs gave a boost to China's copper concentrate imports. Customs data indicate China imported 960,000 tonnes of copper ore and concentrate in August, up 28% year-on-year and holding above 900,000 tonnes for a third month straight. The import volumes through the first eight months grew 18.54% to 7.29 million tonnes.

This ample raw material supply allowed Chinese copper smelters to increase production. China’s refined copper output has been growing in the first seven months of this year, and hit 633,500 tonnes in July, the National Bureau of Statistics reported.

                              China Refined Copper Production 2014


Large copper smelters in China usually step up production in the latter half of each year, in a bid to achieve their full-year production goals. The climbing TCs for copper concentrate will definitely incentivize them to be more productive this year.

Financial reports prepared by five large smelting companies listed in China show their combined copper output hit almost 1.73 million tonnes in the first six months, claiming 49.71% of the national total during the same period, which are detailed in the table below:

Another thing worth noting is refined copper imports. Banks have tightened curbs on L/C issuance in the wake of Qingdao’s metal financing probe in early June, dampening China’s copper imports in July and August. Nevertheless, China’s inbound shipments of refined copper posted a 27.92% year-on-year growth in the first seven months to 2.13 million tonne, meaning possibility remains that this year’s imports will exceed the 3.21 million tonnes through 2013.

At the meantime, SMM observes that copper imports in the form of general trades jumped to 64% of the total in July, much higher than the 42% average for the January-July period. This was a reflection that banks’ control over L/Cs has inhibited re-exports. The rising general trades presage massive inflow of imported copper into China’s domestic market, which also threaten to result in excess copper supply.
 

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