Interfax-China reported that Chinese traders are bearish about buying copper abroad after imports hit 16 month high in September and the price of the metal continues sliding.
Mr Yang Shanghai based metals trader said that Arbitrage trades are becoming more risky as the price gap between London and Shanghai is closing up. The downward trend in global copper prices is also exposing shipments to devaluation during the delivery period.
He said that unstable prices this year have fostered a degree of market uncertainty as to when copper will bottom out with the metal plummeting from a high of USD 10,000 per tonne on the London Metals Exchange in February to USD 6,635 in early October amid gloom in the global economy.
Mr Yang said that traders might have bad memories of similar price fluctuations in 2008 when copper hit an all time high of USD 8,940 per tonne in July prior to the financial crisis only to drop below USD 3,000 by December. With the price sliding and outlook for recovery grim, traders are importing the metal to meet demand rather than build stockpiles.
Despite negativity among traders, Chinese customs data released Thursday show copper imports continuing to bounce back since hitting a low in June, reaching a high of 380,526 tonnes in September up 11.79% on a monthly basis.
Mr Zhang Xi an analyst with Luzheng Futures Company Limited said that import volumes were low in the H1 as traders and smelters consumed large stockpiles built up amid rising prices last year.
According to Zhang, China's copper stockpiles totaled 1.9 million tonnes to 2 million tonnes at the end of last year with reserves at the Shanghai Futures Exchange of only 132,000 tonnes.
Meanwhile, industry association officials in China have maintained forecasts for buoyant domestic demand this year despite worries in the global markets that the world's largest copper user would see a decrease in consumption.
Mr Duan Shaofu director of the China Nonferrous Metals Industry Association's copper department, stuck to his earlier prediction of the country's apparent copper consumption in 2011 breaking 7 million tonnes for first time to hit 7.3 million tonnes YoY growth rate of 6%.
Mr Duan said that China is pushing ahead with the expansion of its power grids in particular in rural areas predicting that domestic demand will continue to run high into H1 next year at least.
China's largest grid operator, the government-owned State Grid Corporation of China expects to invest CNY 300 billion in grid construction this year and consume 1.25 million tonnes of copper.
Mr Liu Minda analyst of Huatai Securities was also upbeat on the demand side but reduced his forecast that growth would exceed 10% down to 10% flat on the weak performance of China's household appliance market this year.
(Sourced from Interfax-China)
