Last Updated : 27 October 2013 at 17:45 IST
Copper market: Place not too much trust on China
Source :Commodity Online/Barclays
October continued to provide a positive outlook to China refined production and import trends but a modest uptick of 20 kt in sHFE copper stocks, the first build up since March may suggest a surplus dynamics evolving, Barclays Research said.
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BEIJING (Commodity Online): China accounts for about 40% of the global copper consumption and hence has a great influence on prices. China refined copper consumption rose to record levels in September and a modest uptick in sHFE stocks may suggest a supply surplus dynamics evolving, according to Barclays Research.
The critical question for the copper market and price performance is whether the strength of September’s apparent consumption can be sustained into Q4 2013. From a refined production perspective, September’s 45% y/y surge in copper concentrate imports, surpassing 1Mt to a new record, would suggest support for continuation of this trend.
According to preliminary International Copper Study Group (ICSG), the refined copper market for July 2013 showed a production deficit of 151,000 metric tons. Chinese apparent refined demand in Juoy reached a record hihg monthly level due to high net refined copper imports.
In the first seven months of 2013, world usage is estimated to have increased by 1.6% (190,000 t), compared with that in the same period of 2012. Despite July’s high level, Chinese apparent demand in the first seven months only increased by 2.3% from that in the same period of 2012 as a result of a 25% decline in net imports of refined copper. However, anecdotal evidence suggests that the lower import level was accompanied by a decline in unreported inventories held in bonded warehouses in China, which may have been all or partially directed to domestic industrial use.
Will China support copper demand ahead
October continued to provide a positive outlook to China refined production and import trends but a modest uptick of 20 kt in sHFE copper stocks, the first build up since March may suggest a surplus dynamics evolving, Barclays Research. However, there is no clear evidence regarding a slowdwon in demand in Q4, Barclays said. The fact that there are unreported inventories from time to time only add to the uncertainty with respect to China data, analysts said.
Despite the recent buoyancy in China GDP growth figures, likely credit tightening in the country may squeeze liquidity in the market and hence cause some downfall in demand for base metals, analysts said. China grid investment is also falling sharply which could have some impact on copper demand.
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