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China's blueprint to stockpile copper expected in five-year plan

LONDON (Reuters) - The prospect of China buying copper for its stockpiles is filtering through the market ahead of a meeting of the country’s leaders to discuss its next five-year economic and social development plan.

FILE PHOTO: Trucks carrying copper and other goods are seen waiting to enter an area of the Shanghai Free Trade Zone, in Shanghai in this September 24, 2014 photo. REUTERS/Carlos Barria/File Photo

The meeting due to take place next week is expected to approve the stockpiling of commodities such as copper, which China has to import due to inadequate domestic resources of the metal used widely in the power and construction industries.

The National Food and Strategic Reserves Administration, China’s state stockpiler, said it was not aware of the situation, when asked about stockpiling plans.

The National Development and Reform Commission, China’s state planner, did not immediately respond to a faxed request for comment.

According to Citi analyst Max Layton, potential catalysts for stockpiling include deteriorating relations with the United States and the COVID-19 crisis highlighting the need to ensure China’s stocks can withstand supply disruptions.

“We would be comfortable making 700,000 tonnes of incremental state buying over the next five years, taking stocks to 90 days of net imports, our base case,” Layton said.

“China imports around 80% of its annual copper consumption - 10.9 million tonnes of 13.5 million tonnes. Those imports represent more than one third of the copper market.”

Graphic: China copper imports

The global copper market including scrap is estimated at between 28 and 30 million tonnes.

China’s imports of unwrought copper and products in the first nine months of 2020 were up 41% from a year earlier at 4.99 million tonnes, more than the amount imported in all of 2019.

Some of this metal came from exchange stocks.

Graphic: Copper stocks

Some analysts say much of the copper exported to China this year has ended up with the state stockpiler, which typically buys copper to support local smelters when prices are low.

“China’s stockpiler is behaving differently this year. Copper prices had recovered by May, but from the import data, it looks as if the state has been buying into September,” said Macquarie metals strategist Vivienne Lloyd.

“China has 16% ownership of world copper mining output, but it consumes about 50% of refined production, a bit of a mismatch.”

Reporting by Pratima Desai; additional reporting by Tom Daly, Min Zhang and Beijing Newsroom; editing by Mark Potter

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