UPDATE 1-CESCO-Jiangxi sees high China copper stocks as temporary

Tue Apr 17, 2012 9:33pm EDT

* Jiangxi sees avg 2012 copper price $8,500/t

* Says not worried about slower China growth

* Says aims to expand through offtake deals, acquisitions

By Silvia Antonioli

SANTIAGO, April 17 (Reuters) - Jiangxi Copper Co Ltd , China's top copper producer, said high inventories in China are a temporary issue and will gradually come down, although end users remain cautious and some expect lower prices and are keeping inventories low.

Chairman Li Yihuang said he was not worried about slower economic growth in China and forecast copper prices will average $8,500 a tonne in 2012 before moving higher in the next few years. London Metal Exchange (LME) three-month copper was is currently trading around $8,000 a tonne.

"I realize that a lot of people are concerned about a Chinese hard landing and high inventories of copper but personally I am optimistic and expect 6-7 percent growth in copper demand for the next five years," Li told Reuters in an interview on Tuesday during CESCO week copper conference.

Top buyer China consumes about 40 percent of the global copper supply.

His comments come after stocks in Shanghai Futures Exchange warehouses have doubled so far this year, raising concerns about the strength of Chinese demand.

Demand from copper cable manufacturing is still very healthy and copper demand from the car manufacturing industry is in very good shape, Li added.

Consumption of copper tubes which go into white goods, such as fridges, however is suffering as inventories for those products in China are high, he added.

Spot treatment and refining charges (TC/RC), which are paid by miners to smelters to turn their concentrate into refined metal, are currently very low and will likely remain so until the last quarter this year.

"Starting from fourth quarter it will get better, TC/RC will be higher. Mining production from 2013 onwards will increase dramatically, more than refinery capacity. This will mitigate the current weakness of TC/RCs, which is good news for smelters," he said.

These charges have been under pressure in recent months due to a shortage of concentrate. Traders reported TC/RCs as low as $27 per tonne/2.7 cents per lb in March, down from around $35 per tonne earlier in the month.

Jiangxi is now looking to expand in copper mining via acquisitions, partnerships or offtake agreements and it is aiming to reach 40 percent self-sufficiency in copper concentrates supply within the next five years.

"This is the first time that I have come to CESCO and the reason I am here is to talk with the mining industry's top executives to seek possibilities of collaboration, investment, offtakes, these kinds of relationships. I feel very positive about Chile because it is such a resources-rich country," Li said.

Jiangxi is also planning to expand production of rare earths and other metals such as zinc, lead and gold, he said.

The company said it is currently exporting about 8 percent of its copper cathodes after not selling any material abroad last year.

The export increase is not a result of lower domestic demand but rather an attempt to cash in on higher prices abroad, Li said.

He said premiums for Jiangxi copper paid for delivery over the Shanghai Futures Exchange benchmark base price were currently at about 80 renmimbi ($12 per tonne), against a 200 renmimbi discount to the benchmark late last year.

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