China Jan refined copper imports up 41% on year

China's imports of refined copper surged 41% from a year earlier, thanks to attractive margins and possible buying by the State Reserves Bureau (SRB).

The world's top copper consumer imported 180,490t of refined copper in January, down 14.7% from December's all-time record of 211,527t, official customs data showed on Monday.

Imports may continue to ease as Chinese smelters ramp up production after problems in the past couple of months and domestic supply increases, putting pressure on metals markets in Shanghai and London. Chinese smelters slowed production in the past two months due to increased stocks of sulphuric acid, a by-product of copper smelting, Shi Lin, an analyst at UK-based consultantcy CRU in Beijing, said.

"They had nowhere to store the acid," he added. "Sulphuric acid prices have now started to rise due to demand for fertilizer and so capacity utilization rates are set to rise." He said that might have the effect of collapsing the arbitrage, in which merchants bought metal on the international market to sell in China to take advantage of the stronger domestic market. "The first quarter should mirror 2008. The local market was very tight but that tightness has eased in the past two weeks. Shanghai inventories are rising and prices are likely to ease."

Copper stocks monitored by the exchange fell 3,776t last week to 30,105t, but are up almost 60% since the start of the year. Some imports may have gone into state warehouses rather than into consumption. Industry sources said last week the SRB might have contracted up to 240,000t of refined copper imports as part of a plan to buy 300,000t. The SRB may eventually import up to 1.2Mt.

But Liang Zhigang, an analyst at Minmetals StarFutures in Shenzhen, said imports in February might be close to December's inflow because merchants had booked more spot copper in January and the bulk of booked copper would arrive in February. "Chinese prices have been higher than cost of imports this year and that is causing high imports," Liang said. "January's imports fell because the December one was very big," he added. He added the week-long Lunar New Year holiday in late January had also reduced working days that month. Liang said some imports might have gone to the SRB given domestic demand had stayed weak.

Fabricators in China had also increased buying of spot copper to build stocks in anticipation that global prices would stay steady as the Chinese state body bought reserves, traders said. "Earlier this month, many fabricators bought cathodes to build stocks," a trader at a large copper smelter said.

A purchasing manager at a large copper tubes plant said the firm's orders from domestic and overseas buyers for the first quarter were rising from the fourth quarter last year but the orders were 20% lower than the same quarter a year ago. "Chinese merchants have asked to increase bookings for Q1 and the first half," a trader who supplies cathode to China said. "Some are adding a few thousand tonnes per month," he added.

Premiums for spot refined copper cathode were being quoted at US$80-US$100 per tonne over cash prices of London Metal Exchange, up from 2009 annual premiums of about US$75 for Chilean copper.

The world's top aluminium producer and consumer exported only 82t of primary aluminium in January, sharply down from December's 46,364t as Chinese prices had stayed strong after the SRB bought 290,000t of metal from local smelters in late December. The state body bought another 290,000t from smelters last Friday and the buying is expected to reach 1Mt in the first half.

Strong domestic prices attracted merchants and fabricators to import primary aluminium in January. Imports rose 19% from a year earlier and 27% from December to 17,138t in January.

But demand for imports was slowing on talk that Beijing may reinstate a 5% tax on imports of primary aluminium as early as in March to limit inflows. "Some merchants have asked suppliers to cancel spot shipments due to arrive in coming weeks," a trader at an international trading house said. From Feb. 1, Beijing allowed duty-free imports of primary aluminium as long as fabricators exported profiles, rods, bars and billets, which would encourage fabricators to import the metal for exports of the products, traders said.