China spot copper buys seen delayed until after lunar holiday
* To wait until factories end Lunar New Year break in Feb -trade
* Recent official data improve consumption outlooks by plants
By Polly Yam
HONG KONG, Jan 11 (Reuters) - Most users of refined copper in China, the world's largest consumer of the metal, will hold off on spot purchases until March, despite brighter prospects for consumption, preferring to wait until factories re-open after Lunar New Year celebrations.
Though recent manufacturing and exports data have been strong, expectations for factories to shut or slow operations for a couple of weeks around the holiday on February 10 will dry up demand, following a pattern in previous years, traders say.
"It's hard to sell physical copper," said a trader at a large Chinese trading firm. "Plants are preparing for the Lunar New Year holidays and may not buy spot metal until late February or early March."
The experience of previous years supports this contention. Copper stocks monitored by the Shanghai Futures Exchange surged 65 percent last year in the month before the festival on January 23, for example.
In the absence of official data on real consumption, Reuters calculations of implied consumption suggest monthly demand for refined copper fell 17.7 percent in January last year while monthly consumption surged 20.8 percent in February.
This year, purchases by plants that use refined copper to make semi-finished items like rods and plates have been weak, although a few plants received more orders in January than in the prior two months, traders and manufacturing sources said.
"Plants received a bit more orders. Their expectations on consumption have improved," said a purchasing manager at a listed firm that uses plates to make electronic parts, adding that strong prices were deterring plants from adding to stocks.
Benchmark LME three-month copper hit a one-week peak of $8,165 a tonne on Thursday, supported by strong exports from China. The price stood at $8,129 on Friday, up 2.5 percent so far this year after a rise of 2.6 percent for all of 2012.
IMPROVING DATA POINTS TO RECOVERY
After China's economic slowdown trimmed demand last year, buyers and merchants were pessimistic on the outlook for consumption in the fourth quarter, but forecasts have perked up after data pointed to signs of a recovery, traders said.
Trade data on Thursday showed the value of China's exports grew 14.1 percent last month from a year earlier, racing past a forecast of 4 percent in a Reuters poll.
Activity in the vast manufacturing sector in December hit its fastest pace since May 2011, a survey of private factory managers showed last week.
China's power grid will increase spending by 4 percent this year, up from growth of 1.3 percent last year, domestic media reported this week, which would help boost copper and aluminium demand, Barclays Bank said in a report.
"Production at our plant has returned to normal after orders fell last year," said a manager at a large plant which produces tubes used in cooling systems, which saw additional orders from China, the United States and southeast Asia.
"Our orders increased in December and then rose further in January," he added, with January orders doubling from a year ago to more than 30,000 tonnes. His plant expects orders to rise strongly in March and April, to about 40,000 tonnes a month.
Although he said orders to large plants making higher-quality copper plates and sheets had risen, smaller plants had not benefited equally.
State-backed research firm Antaike forecast China's refined copper consumption to rise 5.5 percent to 8.1 million tonnes this year, outstripping an expected rise of 4.8 percent in 2012.
Still, buyers of refined copper are watching for convincing evidence of a recovery.
"None of the plants we know are increasing copper purchases. We will buy more when we see solid evidence of a recovery," said the purchasing manager, who did not want to be identified because he was not authorised to speak to the media.
Plants in China would buy more refined metal if the price fell to $7,500 to $8,000, traders said.
REFINED COPPER OUTPUT AT RECORD
China's refined copper output hit a record 531,000 tonnes in November, and December output is expected to stay strong.
Supply is plentiful, with thousands of tonnes in bonded stores, although stocks have fallen slightly in the past month from November's record.
Plants expecting to wind down production in the next three weeks have been buying spot copper hand-to-mouth, while those with metal stockpiles are running them down close to the holiday and may rebuild the stocks after the break, the first trader, at the large Chinese trading firm, said.
"Before the Lunar New Year holidays plants would be cautious on buying. We don't see a pickup of the buying until March," a trader at an international trading house said. (Reporting by Polly Yam; Editing by Clarence Fernandez)