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China Copper Demand to Drop as SRB to End Purchases

[Minor metal] Offers for Selenium Dioxide up Slightly in Domestic Market

BEIJING, June 22 -- China's State Reserve Bureau will probably stop buying copper, pushing down prices after a 63 percent rally this year, according to a trader at Zhejiang Honglei Copper Co.
&nbsp;&nbsp;&nbsp; China's demand will fall in the next quarter and imports will decline, Zhao Mingwang, manager of futures trading, said. Zhejiang Honglei produces about 100,000 metric tons of wires and rods a year and buys material from Jiangxi Copper Co., the country's largest producer, Zhao said today.
&nbsp;&nbsp;&nbsp; Copper has surged in the industrial metals rally this year driven by investments and stockpiling by China's reserve bureau, known as SRB, raising costs for manufacturers and profits for producers such as BHP Billiton Ltd.
&nbsp;&nbsp;&nbsp; Hedge-fund managers and other speculators increased their net-short positions in New York copper in the week ended June 9.
&nbsp;&nbsp;&nbsp; &quot;What's the significance of further SRB purchases in a market that's fundamentally weak?&quot; said Wang Jun, analyst at Beijing Antaike Information Development Co. &quot;
&nbsp;&nbsp;&nbsp; Demand will be weaker next quarter and what we heard from some copper wire, tube and strip producers was that orders for future months are not as good as previous months.&quot;Futures in London dropped 0.2 percent to $4,960 a metric ton at 11:51 a.m. Beijing time. Prices fell 0.03 percent to 39,220 yuan ($5,737) a ton in Shanghai trading.
&nbsp;&nbsp;&nbsp; &quot;Demand is not as good as people had expected,&quot; Zhao said. &quot;In the second half, the SRB is unlikely to buy more, so copper price fluctuations will solely rely on real demand. The third quarter will be a slow season, so we expect copper to fall.&quot;
&nbsp;&nbsp;&nbsp; Chinese Imports
&nbsp;&nbsp;&nbsp; Zhao was previously the general manager of copper wires and rods at Jiangxi Copper Products Co., a unit of Jiangxi Copper.
&nbsp;&nbsp;&nbsp; Copper may drop next week on speculation of less Chinese imports, fourteen of 18 analysts, investors and traders surveyed by Bloomberg said. China's copper imports had climbed for a fourth month to a record in May.
&nbsp;&nbsp;&nbsp; The SRB contracted to take between 300,000 tons and 400,000 tons of refined copper from overseas this year, according to Macquarie Group Ltd. The bureau has stockpiled copper, aluminum, zinc, soybeans and corn this year after prices collapsed. The bureau didn't return a call for comment.
&nbsp;&nbsp;&nbsp; &quot;SRB's purchases are coming to an end,&quot; Zhao said. Prices have rallied and SRB has met its stockpiling target, he added, without elaborating.
&nbsp;&nbsp;&nbsp; Rising Inventories
&nbsp;&nbsp;&nbsp; Rising inventories in warehouses monitored by the Shanghai Futures Exchange is a sign of falling demand, Zhao said. The inventories grew by 15,167 tons to 60,647 tons as of June 12, exchange data showed.
&nbsp;&nbsp;&nbsp; The Chinese government's policy to boost rural purchases of autos and home appliances has had a &quot;positive&quot; impact on copper demand, Zhao said. Still, that was only enough to compensate for a decrease in exports of products such as tubes, he said. Copper tubes are used in air-conditioners.
&nbsp;&nbsp;&nbsp; China is spending 4 trillion yuan on a stimulus package to revive growth.
&nbsp;&nbsp;&nbsp; &quot;Even with the stimulus package, Chinese copper demand is unlikely to grow beyond 10 percent this year,&quot; Zhao said. Annual demand has expanded between 10 percent and 20 percent in the past five years, he said.
&nbsp;&nbsp;&nbsp; (Source: Bloomberg)
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