China copper smelters scale back exports as domestic prices recover

Fri May 9, 2014 4:22am EDT

Related Topics

* Smelters export more than 100,000 T of refined copper in April

* May exports expected around 75,000 tonnes

* Export cut to ease domestic supply shortage

By Polly Yam

HONG KONG, May 9 (Reuters) - China's smelters have cut exports of spot refined copper over the past week to sell more in the domestic market where prices have risen, easing a supply shortage in the world's top consumer of the metal.

Reflecting the easier availability, premiums copper buyers in China pay on top of the Shanghai Futures Exchange front-month contract to secure physical metal have halved to around 500-600 yuan ($80.28-$96.34) per tonne this week from more than 1,000 yuan in April, traders and sources at smelters said.

But the drop in exports could mean constrained supplies in the international market, supporting benchmark London Metal Exchange (LME) prices that have fallen more than 8 percent this year due to an expected global surplus.

Large Chinese copper smelters jointly drew up a plan in March to boost exports of refined copper in an effort to cope with low domestic prices. They exported more than 100,000 tonnes in April for spot and term shipments, the traders and sources at smelters said.

The bulk of the metal had been delivered to bonded warehouses in China on requests by buyers, they said. This would not show on customs data until the metal physically leaves the country.

Smelters' exports were likely to fall to about 75,000 tonnes in May as they only kept term shipments after increasing spot selling in the domestic market this month, a trader and an executive at a large smelter said.

"Smelters' exports this month won't be as high as last month because they are selling more domestically," the executive said, who declined to be named because he was not authorised to talk to the media on the subject.

He added that smelters had already contracted to export about 75,000 tonnes of refined copper per month for 2014, which, coupled with spot selling in March and April, would push up China's shipments to a record 1 million tonnes this year.

FALLING STOCKS

China copper premiums in April hit their highest levels since 2011 after smelters cut domestic supply in favour of exports. In March, buyers could get discounts.

The high premiums became a draw for smelters to sell more domestically but prompted some copper end-users to delay spot purchases, even though seasonal demand pushed up their orders, according to the traders and sources at smelters.

A high price also led to importers bringing in metal into the domestic market, traders said.

Premiums for bonded copper stocks in Shanghai have nearly doubled to $130-$140 per tonne over cash LME prices this week compared to early April, traders said.

Wu Yuneng, vice president of top producer Jiangxi Copper , said buyers may face tight supply in coming months due to falling stocks in China and the LME.

He added that the global refined copper market may see a deficit of about 600,000 tonnes this year, similar to 2013.

"Many institutions have expected a surplus in the global market this year. That's right for concentrates but it is not right for refined copper," Wu said.

Bonded copper stocks in Shanghai stand at about 600,000-700,000 tonnes currently, down from 650,000-700,000 tonnes in late April, even after smelters increased exports to the bonded warehouses last month, three traders estimated.

Copper stocks in the Shanghai exchange CU-STX-SGH were at the lowest since December 2011 as of Friday. LME stocks were at the lowest since October 2008 MCU-STOCKS on Friday. ($1 = 6.2280 Chinese Yuan) (Editing by Muralikumar Anantharaman)

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