ArticleDJ China Feb Copper Imports Likely Hit Record High - Analysts ( )
SHANGHAI, Mar 09, 2009 (Dow Jones Commodities News via Comtex) -- China's refined copper imports for February likely hit a record high, boosted by rising downstream demand and government stockpiling, analysts and traders said Monday.
"Orders from small- and medium-sized wire and cable makers increased significantly recently, and that showed a growing appetite for refined copper in the domestic market," said Che Hongyuan, an analyst with Galaxy Futures.
Thanks to Beijing's CNY4 trillion stimulus plan that will help boost the domestic metals market, demand from small- and medium-sized cable and wire makers rose significantly, as most of the money will go to copper-intensive projects such as railway and highway construction and power grid expansion.
For example, news that China Southern Power Grid Corp. plans to increase investment this year by 30% compared with last year to CNY102.5 billion will certainly help lift domestic copper demand in the long run, said analysts.
In addition, copper demand usually picks up in the second quarter, when consumption is traditionally high, and given relatively tight domestic supply, "end-users will have to import refined copper to resume production," said Che, referring to the end of last year, when many downstream companies halted production due to weak domestic demand.
Although the SHFE premium against LME prices has eased recently, arbitrage imports could have still contributed a small portion to refined copper imports in February, said analysts.
Imports of refined copper in January declined 15% to 180,490 metric tons from December's record-high 211,527 tons, still showing a 43% on-year rise, according to data released last month by the General Administration of Customs.
While the pace of refined copper imports slowed a bit in January due to increasing domestic output and a declining premium to LME prices, February could see a rebound largely because of the State Reserve Bureau's strategic stockpiling of the red metal from overseas, said analysts and traders.
China's State Reserve Bureau is believed to have imported 300,000 tons of copper to shore up its metal reserves, and continued canceled warrants indicated "moves to sell metal into China to take advantage of the large premium of SHFE over LME prices," said Barclays Capital in a research note last Wednesday.
Canceled warrants, an indication of metal marked for shipment out of warehouses in the future, rose by 9,400 tons, or 12.2% of total LME copper stocks last week, the highest level since May 2008.
Continued tightness of scrap copper supply might also explain the possible surge in refined copper imports last month, analysts said.
"Some processors would have to replace scrap copper with refined copper to resume production because of the tight supply there," said He Xiaohui, an analyst with Beijing Antaike, the state-owned metals consultancy.
China's General Administration of Customs is expected to release February preliminary trade data Wednesday.
-Yue Li contributed to this story, Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com
(END) Dow Jones Newswires
03-09-09 0309ET