Bloomberg quoted China International Capital Corp as saying that copper purchases by China to boost stockpiles may flip the global market from surplus into deficit this year, boosting prices already underpinned by stimulus spending.

Analysts led by Mr Luo Wei said China’s State Reserve Bureau may raise purchases to 1 million tonnes from 600,000 tonnes. The purchases would easily turn a global surplus of between 350,000 tonnes and 400,000 tonnes this year into a deficit.

China’s largest investment bank, known as CICC, joins Macquarie Group Ltd and BOC International Co in suggesting China may take advantage of the slump in copper prices triggered by the global recession to build up holdings. Copper has gained 25% in London this year after slumping 54% in 2008.

Mr Cai Luoyi chief analyst at China International Futures Co said “China’s State Reserve buying has been one of the main reasons for copper prices being so resilient this year. If they really buy so much, it may well reduce the global surplus.”

London Metal Exchange copper for delivery in three months rose as much as 1.1% to USD 3,841 a ton, before trading at USD 3,820 a tonne. The contract advanced to USD 3,862 a tonne recently the highest since November 14th after China’s imports of the metal jumped 55% in February.

China International Capital’s analysts said “Copper is also set to benefit the most from the Chinese government’s stimulus plan and the start of the country’s peak construction season after the winter months.”

(Sourced from Bloomberg)