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China copper prices seen rising after Lunar New Year holiday
January 24, 2014 / 10:02 AM / 4 years ago

China copper prices seen rising after Lunar New Year holiday

* Weak pre-holiday demand pushes down premiums to 5-mth lows

* Premiums for bonded stocks in Shanghai at $150-$165 this week

* Bonded stocks near 600,000 tonnes currently -traders

By Polly Yam

HONG KONG, Jan 24 (Reuters) - Chinese end-users face higher spot prices for refined copper in the domestic market next month when many factories reopen after the Lunar New Year break, boosting domestic demand amid tighter global supplies because of strikes at Chilean ports.

Many producers of copper products such as tubes and power cables were also not able to build sufficient copper inventories ahead of the holiday due to the rising cost of raising cash to pay for the metal, trading sources said.

Stronger domestic prices in China could prompt spot import demand from the world’s top copper consumer after the holiday break. That could help support global prices, which were on track for their biggest weekly fall since mid-November this week.

The pre-holiday cash crunch in China was more serious this year than in previous years, making end-users cautious about building copper inventories ahead of the Lunar New Year, traders and officials at refined copper producers said.

Reflecting weak pre-holiday demand, Chinese prices for spot refined copper saw rare discounts of 70-300 yuan ($11.60-$49.60) per tonne to the front-month contract of Shanghai Futures Exchange this week.

Last year at the same time spot copper was selling at premiums of about 200 yuan to the front-month Shanghai contract.

This year Lunar New Year falls on Jan. 31.

“The main problem of the domestic demand now is the cash flow,” an executive at a large copper producer said.

“The cash crunch happened in previous years but this year is more severe. The demand, as well as prices, should pick up after the holiday,” the executive said.

The cash crunch prompted China’s central bank to inject 255 billion yuan ($42 billion) into the interbank market this week, the largest amount in one day in 11 months.

A large end-user said the firm was considering building its copper inventories to cover orders in February, although high financing costs were forcing the firm to delay purchases until next week and cut the amount.

China’s arrivals of refined copper were likely to fall next month as a result of port strikes in Chile, the largest supplier to China, traders said.

Workers at 14 ports in Chile are on strike. State miner Codelco, the world’s top producer, said on Jan. 10 that the strikes had delayed around 20,000 tonnes of copper exports.

Lower imports would draw down bonded stocks of refined copper in Shanghai, pushing up premiums, the traders said.

The Shanghai stocks currently stand near 600,000 tonnes, up from about 460,000 tonnes in mid-December, traders estimated.

Premiums for the stocks fell to $150-$165 a tonne over cash London Metal Exchange this week, the lowest since August 2013, traders said.

China does not release bonded stock figures and the stocks are typically estimated by traders. ($1 = 6.0517 Chinese yuan) (Reporting by Polly Yam; Editing by Tom Hogue)

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