* Bonded stocks seen rising by more than 100,000 tonnes by year-end
* Physical demand seen worsening in December as firms repay loans
* Total stocks may rise to 1.5 mln T by year-end from 1.4 mln T (Adds details, background)
By Polly Yam
HONG KONG, Nov 20 (Reuters) - Copper stocks in China’s bonded warehouses hit a record high of over one million tonnes late last week and inventories are expected to rise by around 100,000 tonnes by the end of the year due to weak domestic demand, traders said on Tuesday.
Rising stockpiles are set to dampen China’s appetite for spot imports and 2013 term shipments, and likely to weigh on benchmark London Metal Exchange copper prices.
China is the world’s top consumer of copper, and most local copper buyers are preparing to hold annual contract negotiations with overseas suppliers as early as next week, traders said.
Demand for industrial metals such as copper has weakened this year as China’s economic growth slows, largely due to a decline in manufacturing activity as its main export market Europe remains beset with financial woes.
Traders estimate about 1.04 million tonnes of refined copper cathode are stored in bonded warehouses in Shanghai and the southern province of Guangdong. One trader, however, said stocks were at 900,000 tonnes, unchanged for early 2011 levels.
Total inventories across China - including those stored at these bonded warehouses, Shanghai Futures Exchange warehouses, smelters and fabricating plants - are currently around 1.4 million tonnes, the traders added.
Metal stored in bonded warehouses has not been assessed for 17 percent value-added tax. China does not release official data on its inventories but traders track stock levels during regular visits.
“Bonded stocks now are at historical highs in China. With stocks at that level, Chinese importers are cautious about placing yearly orders for 2013 term shipments,” said a veteran trader at an international trading house which sells copper cathode to China.
The trader, who declined to be identified as he was not authorised to speak to the media, said bonded stocks were likely to rise by 100,000 tonnes at least by the end of this year as term shipments are delivered.
Bonded stocks in Shanghai are believed to be around 850,000 tonnes, while stocks at Guangdong are nearly 190,000 tonnes, said a trader at a large Chinese trading house and a sales manager at a large Chinese copper smelter.
“We estimate total stocks of refined copper cathode in China would rise to 1.5 million tonnes,” the sales manager said, adding that already thin demand for copper may weaken further as firms cut back on purchases to repay their loans before the end of the year.
The growth of China’s imports of anode, refined metal, alloys and semi-finished copper products in October fell for the first time since August 2011, with the total volume of around 320,000 tonnes being the lowest amount in 15 months. Analysts have said that the steep decline could mark the start of several months of weak imports.
China, the world’s second-largest economy, could stage a tepid economic rebound in the fourth quarter as higher public infrastructure spending nudges it out of seven consecutive quarters of slowdown, but growth will remain lethargic through 2013 a Reuters poll showed. (Editing by Fayen Wong and Miral Fahmy)