China Copper Demand Seen up, Stocks Cap Imports

WUHAN, Nov. 9 -- China's consumption of copper is expected to stay robust next year as Chinese feel more confident about the economy, but demand may not filter through to imports in the next six months because of large local stockpiles.

    Many traders, analysts, producers and end-users at a 2-day copper conference on the weekend in Wuhan, a city in Hubei province, believe domestic copper demand will climb next year because output of semi-finished copper products will rise to meet the needs of the power, building and home appliance sectors.

    But imports of refined copper into China, the world's top copper consumer and the driver for the more than 100-percent price rise on the London Metal Exchange MCU3 this year, may not reflect demand for at least the next six months as China digests stocks built this year as a result of record imports.

    "People's confidence is coming back," said Zhang Xuefeng, general manager of the material department of copper end-user Ningbo Kangqiang Electronics, which is finishing a new facility to boost production by 20-30 percent. "The economic recovery is getting faster. Investment projects are picking up."

    Zhang said the semi-conductor sector was recovering rapidly. The optimism among copper buyers was shared by some suppliers.

    "Next year's demand should be better than this year," said a sales manager for smelter Daye Non-Ferrous Metals. He said there was good demand from the power sector and copper tubes producers.

    In 2010, China's real refined copper consumption is expected to rise 8 percent on the year to 5.83 million tonnes, supported by the power and building sectors, state-backed research group Antaike predicted. This year's consumption is estimated at 5.4 million tonnes, up 10.2 percent.

    Senior Antaike analyst Wang Jun told the copper conference on Sunday that production of semi-finished copper products may rise, with annual capacity of wire rods reaching 4 million tonnes in 2010 from 3.3 million tonnes this year and of plates and strips hitting 2 million tonnes from 1.8 million tonnes. But not everyone is bullish.

    "Demand now cannot compare with the first half of last year and 2007. Demand has not fully recovered," said an executive at Anhui Xinhe New Materials, which used 100,000 tonnes of copper a year to make rods, strips, plates and wires. "We estimate demand may be not that good next year."

    STOCKS

    At least 300,000 tonnes of imported copper are stored in bonded warehouses in Shanghai of which two-thirds were built in September-October, traders said.

    The bonded stocks were already calculated as imports in China, although they have not been declared the customs for taxes.

    "Imported copper is still going in. Bonded warehouses in Shanghai are getting full," a warehouse source said.

    China's imports of refined copper surged 165 percent on the year to 2.58 million tonnes in the first nine months of the year.

    Antaike has estimated China would add 1.63 million tonnes in copper stocks by the year-end on imports and strong domestic production. It estimated 1.2 million tonnes of copper stocks were built in January-September.

    That latest estimate suggests some 430,000 tonnes of stocks of copper would be built in the fourth quarter.

    Li Chang, research manager at Mail Yard Futures, said he believed the bulk of stocks in China were held privately.

    Speculators may have been selling small portions of stocks in China onto the domestic market in the past two weeks, driving down spot prices, traders said.

    "Speculators should be willing to sell some stocks at 50,000-60,000 yuan per tonne," the Daye sales manager said. "Some may not want to sell, if they're waiting for record prices."

    Spot copper traded just below 51,000 yuan a tonne on Friday.

    It is unclear whether speculators will refill their stocks or buy more copper to build bigger stockpiles.

    "It is possible speculators will buy more copper next year, depending on credits and money supply," a senior executive at a private fund in Shanghai said.

    (Source: Reuters)