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[Cu] SMM Analysis - Unexpected Growth in China's September Copper Imports Will Not Likely Reflect Chinese Actual Demand

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SHANGHAI, Oct. 15 (SMM)&nbsp;-- According to preliminary data released by the General Administration of Customs, China's imports of unwrought copper and copper semis were 399,052mt in September, up 23% MoM. Market players predicted previously that copper imports would drop on a monthly basis for three consecutive months, so the unexpected increasing copper imports drove up copper prices immediately.
&nbsp;&nbsp;&nbsp; However, whether or not copper imports growth indicates the recovery of Chinese demand? SMM believes China's copper imports in September will not reflect actual domestic demand directly for several reasons.
&nbsp;&nbsp;&nbsp; First, China's output of refined copper was 364.9mt in August, up 8.6% MoM, setting a record high in the memory. However, according to SMM survey in September, China's output of refined copper will remain high, or even increase further, which will likely increase imports of crude copper and anode copper.
&nbsp;&nbsp;&nbsp; Second, domestic imports of copper semis will likely increase as well along with the gradually recovery of import and export markets and macro economy.
&nbsp;&nbsp;&nbsp; Third, LME copper prices have risen increasingly to test USD 6,500/mt supported by positive economic data in the US and Europe from late August to mid-September, stimulating market optimistic sentiment, so the speculative purchases will likely boost copper imports to a certain extent.
&nbsp;&nbsp;&nbsp; Fourth, LME Asian copper inventories increased by 48,650mt from mid-July level of 4,000mt to October, with a growth of 28,575mt in September. The SHFE/LME copper price ratio has fallen to break-even point in June, reducing imports of refined copper and stimulating domestic exports of refined copper to increase. Sources report that refined copper has been re-exported from China since July, so there will be high possibility that China's re-exports of refined copper will grow significantly in September.
&nbsp;&nbsp;&nbsp; In summary, SMM believes China's copper imports growth in September will not reflect the recovery of Chinese demand given the possibility of increases in imports of crude copper, anode copper and copper semis, as well as significant growth in re-exports.
&nbsp;&nbsp;&nbsp; China's export data and net imports of refined copper will be released this month, which will likely help confirm SMM forecast. In addition, China's output of copper semis remains an important factor to demand outlook.
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