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China to remain biggest copper importer in 2010
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Wednesday, 31 Mar 2010
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Monetary tightening in China continues to be the primary focus of the copper market, given that loose stimulus lending in 2009 soaked up much of the copper surplus in 2009.

Chinese trade data so far for 2010 has showed imports and exports for all goods up significantly from last year. This has stoked fears that Beijing will tighten lending considerably to prevent economic overheating, cooling demand. February data for new loans certainly seems to add fuel to the fire, with loans almost half that of January, at CNY 700 billion. However, these new loans at second glance are very positive, given that they are up significantly on any month in H2 2009 and were achieved despite the mid month New Year festivities.

China’s import of unwrought copper and copper products flew in the face of expectations in February, rising 10.3% on the month, to 322,282 tonnes. The rise can be partly explained by low copper scrap levels, with imports down 57,000 tonnes on the month, to 280,000 tonnes in February. It is also a function of arbitrage trading between the SHFE or LME differential which was open for part of February. Even so, China’s imports of copper were impressive, especially given that Chinese refined copper production in February rose 6.5% to 358,000 tonnes. January and suggests China may remain a big importer of copper in 2010.

LME copper stocks have fallen consistently since late February from Asian and, importantly, European and US locations, suggesting an improvement in demand. In addition, bonded warehouse stocks in Shanghai fell by 50,000 tonnes in February, to less than 100,000 tonnes in early March. They were close to 250,000 tonnes at the start of this year.

This is positive because it erodes the buffer of China’s refined copper imports in the months ahead. Much of this however has gone into SHFE inventories, which have increased by more than 54,000 tonnes over the same period, to more than 155,000 tonnes as of March 12th 2010. Importantly, LME cancelled warrants have risen since February 10th 2010 to as much as 35,975 tonnes in early March and by mid March 77 percentage of this cancelled tonnage was for metal in US and European locations.

(Sourced from Commodity Online)

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