China Demand for Spot Copper Falls on Prices, Cash Reuters

HONG KONG, April 1 (Reuters) - Demand for spot refined copper in China, the world's biggest market of the metal, is weakening because of high prices and tighter monetary policy, industry sources said on Thursday.

A copper tubes producer is expected to reduce the buying of spot refined copper by two-thirds in April from around 8,000 tonnes in March, a trade manager said.

"Demand is not as good as we had expected," he said, adding that 7,000-8,000 tonnes of the producer's copper tubes due to deliver in March had been delayed to April.

"March should have been the best month in the year (for copper tubes). But clients did not take all deliveries," the manager said.

"Demand usually falls in April and drops further in May."

He said higher prices were prompting clients to put purchases on hold.

The benchmark three-month Shanghai contract rose 5.7 percent in March, while spot refined copper prices in Shanghai rose 5 percent during the month.

Traders said Beijing's reduced liquidity had reduced cash flows to copper end-users, cutting purchases.

Chinese banks extended about 700 billion yuan ($102.5 billion) in new loans in February, half that of January, as the government clampdown on lending took hold. 

The country's four biggest banks made net new loans of about 180 billion yuan in the first two weeks of March. Beijing has not released the March figure. 

"Banks requested loan repayments before the end of the first quarter, reducing customers' cash flows," said a trader for a large copper smelter.

SUPPLY

But supply remained abundant in China, traders said.

Copper stocks in warehouses monitored by the exchange was just below a 7-year high at 155,465 tonnes last Friday. The stocks excluded copper in bonded warehouses for which traders estimated stocks around 200,000 tonnes in Shanghai city.

"High discounts reflect demand has not improved much. High stocks reflect oversupply," Li Yihuang, chairman of top copper producer Jiangxi Coppe told reporters in a news conference in Hong Kong on Wednesday.

Spot copper traded at discounts of about 550 yuan per tonne from the nearest month April contract <SCFJ0> on Thursday, compared to premiums of about 455 yuan a year ago.

Traders said weak demand was spurring merchants to resell booked copper imports due to arrive in April at premiums of around $80 per tonne over cash London Metal Exchange prices <MCU0>, lower than $90-$100 traded for bonded copper in Shanghai this week.

China's refined copper imports rose 12 percent on the month to 220,530 tonnes in February, which traders said was probably due to attractive margins for spot arrivals and ahead of forecasts for 190,000 tonnes.