Pig-Farmer Investors Hold 50,000 Tons of Copper, Sucden Says

SINGAPORE, Sept. 17 -- Private investors in China, the world's largest metals user, have stockpiled "substantial" quantities of copper as the government ramps up stimulus spending to spur the economy, according to Sucden Financial Ltd.

    Pig farmers and other speculators may have amassed more than 50,000 metric tons, Jeremy Goldwyn, who oversees business development in Asia for London-based Sucden, wrote in an e- mailed report after a visit to China. That's about half the level of inventories tallied by the Shanghai Futures Exchange, which stood last week at a two-year high of 97,396 tons.

    Sucden's estimate underscores the difficulty analysts face in gauging metals demand in China amid increased speculation by retail investors, whose holdings remain outside the reporting framework undertaken by exchanges. Private investors in China also had as much as 20,000 tons of nickel, Goldwyn wrote.

    "Private stockpiles, built by many including the much- vaunted, pig-farming speculators, have clearly absorbed substantial quantities of metal," Goldwyn wrote. "Much of this metal will remain out of the normal market place."

    Copper on the London Metal Exchange has more than doubled this year as China's 4 trillion yuan ($586 billion) stimulus plan and record $1.1 trillion of lending in the first half spurred purchases of the metal used in construction and autos.

    'Quick Sellers'

    Scotia Capital Inc. analyst Liu Na highlighted the role of Chinese pig farmers and other private speculators in the metals markets in an Aug. 17 note that cited reports from state-owned China Central Television. These speculators may become "quick sellers" if sentiment turned, Liu said in that note.

    To be sure, Sucden's Goldwyn wrote that the stockpiles of copper and nickel held by farmers and others in China may "not be 'dumped' back in the foreseeable future as some have recently suggested, wherever prices go." Goldwyn didn't give a reason.

    China's imports of refined copper rose to a record 2.1 million tons in the first seven months, driven by purchases by the State Reserve Bureau and other consumers, and shortages of scrap. The State Reserve Bureau had contracted to take 300,000 to 400,000 tons of refined copper into its stockpiles from overseas this year, according to Macquarie Group Ltd.

    "Restocking continues, though it seems to have moved further downstream, including manufacturers building end-product stocks," Goldwyn wrote. In some industries, such as the makers of copper tubes for air-conditioners "demand is back to pre- crash levels stimulated by government incentives, and will show significant year-on-year gains in the coming weeks and months."

    (Source: Bloomberg)