China Copper Demand May Rise in October, Nippon Mining Says

BEIJING, July 16 -- China's copper demand may rebound starting October as stimulus spending boosts economic growth in the world's largest consumer, according to Nippon Mining & Metals Co.

    Imports may recover to around 200,000 metric tons to 300,000 tons a month, after dropping during July to September, company President Masanori Okada, said yesterday, without giving a figure for the current quarter. The unit of Tokyo-based Nippon Mining Holdings Inc. holds a 66 percent stake in Pan Pacific Copper Co., Japan's largest producer of the metal.

    China's copper imports may falter this quarter as state stockpiling slows and after record volumes boosted inventories ahead of the seasonally slow summer consumption period. Imports may drop to around 100,000 tons a month in July to December from an average 280,000 tons in the first five months, UBS AG analysts said in a July 6 report. The nation's 4 trillion yuan ($585 billion) stimulus is helping to boost economic growth.

    "China's demand is expected to slow during the summer period after a sharp increase in the first half, but with the country's huge stimulus package taking effect later this year, its imports will likely return to a normal pace," said Yoshihiko Nagata, general manager at the Japan Mining Industry Association's planning & co-ordination department.

    China's gross domestic product expanded 7.9 percent in the second quarter from a year earlier after a 6.1 percent gain in the previous three months, the statistics bureau said today.

    Japan Exports

    Japan's copper cathode exports to China surged to 219,850 tons in January to May from 86,186 tons a year earlier, according to the Tokyo-based Finance Ministry. Total exports of the metal rose 87 percent to 323,587 tons in the period.

    Three-month delivery copper on the London Metal Exchange fell 0.5 percent to $5,235 a ton at 1:01 p.m. in Tokyo curbing its gain this year to 71 percent.

    Infrastructure spending and government subsidies to increase consumer spending on cars and flat-panel televisions would help boost China's demand, Okada said in an interview.

    "China has no choice but to stimulate domestic demand," he said. "When they construct roads, electric wires are put up," driving demand for copper, he said.

    Refined metal imports were a record 337,230 tons in May, Beijing-based customs office data showed on June 22. Inbound shipments of copper and copper products increased to an all-time high of 475,999 tons last month, based on preliminary government data on July 10.

    Metal Reserves

    Imports of copper and copper products soared also as scrap supply plunged and the State Reserve Bureau probably boosted inventories. Caijing magazine reported in June that China has bought 235,000 tons of copper for strategic reserves this year, citing Yu Dongming, a Chinese government official. The country may not continue purchases of industrial metals after prices rebounded, the magazine said June 29, citing Yu.

    Nippon Mining's Pan Pacific smelting operations are close to settling mid-year copper processing fees with Melbourne-based BHP Billiton Ltd., the largest mining company, Okada said.

    An offer from BHP of about $48.50 a ton for smelting and 4.85 cents a pound for refining was below the level required to make profits, Okada said.

    Japanese smelters have tried to maintain the 2009 calendar contract level of $75 a ton and 7.5 cents a pound, Atsushi Yamaguchi, a Tokyo-based analyst at UBS said last month.

    A deal with Pan Pacific would set a benchmark for Japanese smelters. The so-called treatment and refining charges usually drop when there is a shortage of raw material and smelters have to compete for deliveries.

    Last year, Japanese smelters settled mid-year fees at around $42.50 a ton and 4.25 a pound, according to data compiled by the Japan Mining Industry Association.

    (Source: Bloomberg)