China's Copper Imports May Slacken, Aurubis Says

HAMBURG, June 22 -- China's copper imports are not likely to remain at the high level seen in May and could weaken in the second half of 2009, Europe's largest copper producer Aurubis (NAFG.DE) said on Friday.

    "The high imports in China in the last few months have significantly improved the physical availability of copper there, so that the price difference between the SHFE (Shanghai Futures Exchange) and LME (London Metal Exchange) has disappeared," said a report from Aurubis, previously Norddeutsche Affinerie.

    SHFE Copper stocks had risen sharply so far in June and it was also believed China had other inventories outside the exchange that could be released to cover demand, it said.

    "It is thus expected that China's monthly copper imports will not continue at the high May level in the second half of 2009," it said.

    If this view is increasingly adopted in short-term strategies of investment funds, it could result in profit-taking and cause a downward copper price correction as seen in past days with copper falling below $5,000 a tonne, it said.

    LME copper for three months delivery MCU3 was at $5,039 a tonne at 1146 GMT on Friday. Copper has fallen around 8 percent since hitting an eight-month high of $5,388 a tonne last week. [ID:nLJ214626]

    "Whether the copper price can establish itself long-term above the US$5,000 a tonne mark in the coming weeks is questionable," Aurubis said.

    LIMITED PRICE DECLINE

    Along with weakening Chinese demand, the quieter summer trading period was imminent, as already reflected in the slowing reductions in LME stocks.

    "However, copper is fundamentally well supported so that the price decline should only be limited," it said.

    Meanwhile, spot copper treatment and refining charges (TC/RCs), the fees charged by smelters to refine copper concentrate into metal, had fallen to as low as $30 a tonne and 30 cents a pound from $50 a tonne and 5 cents a pound in late May, it said.

    The drop was largely due to Shanghai copper prices being higher than the LME. 

    This price spread meant profits could be made by Chinese smelters working at lower TC/RCs when they made cathode (new metal) sales at higher Shanghai prices. But a rise in TC/RCs was expected again following the leveling out of the difference in Shanghai and LME copper prices.

    "On the copper scrap market, there have been delays in Chinese ports in clearing imported quantities," Aurubis said.

    "This together with the disappearance of the (Shanghai/LME) arbitrage has resulted in a far-reaching withdrawal of Chinese buyers from the market with the result that the situation for European buyers has improved.

    "In the copper product sector the bottom seems to have been reached. Stabilisation and a slight recovery is also apparent."

    (Source: Reuters)