Found this articleReuters reported that Chinese buyers may cut...

Found this article


Reuters reported that Chinese buyers may cut previously booked London Metal Exchange refined copper stocks over coming months as arrivals into the world's top consumer of the metal have built up inventories and weighed on spot premiums.

Traders said that fewer shipments into China would mean more supply on the international markets which could blunt a rebound in prices. London copper is still down nearly 10% on the year but is up more than USD 500 from a low hit in June.

Chinese importers have queued up to take LME stocks of copper bought in June when price differentials between Shanghai and London were favorable for imports. They mostly paid premiums of about USD 150 per tonne to USD 160 per tonne over cash LME prices.

Traders said that the importers had planned to cash in as premiums later rose to 4 year highs of above USD 200. But spot premiums have since fallen back to about USD 150 per tonne and are expected to fall to USD 100 to USD 130 in the coming 2 months.

Trader said that People are expecting premiums to fall and have been unwilling to buy mostly in the past two weeks referring to copper stocks in bonded warehouses in Shanghai. The arbitrage window had been mostly closed this month, prompting some importers to store copper arrivals in bonded warehouses, instead of paying the value added tax and reselling into the domestic market as previously planned.

The bulk of the earlier orders were scheduled to arrive in China between July and October leading to the rising inventory. China's arrivals of refined copper were estimated at 300,000 to 350,000 tonnes for August with imports likely to increase to about 400,000 tonnes in September. Arrivals included both spot and term shipments delivered from LME warehouses and global producers.

Official data showed that refined copper arrivals rose 5% in July from the previous month, hitting a 10 month high of 291,846 tonnes. Copper in bonded warehouses in Shanghai rose to about 400,000 tonnes to 460,000 tonnes from around 370,000 tonnes in late July, traders estimated. Stocks were still less than half of a record one million tonnes hit in late January.

Traders said that banks in China also remained cautious about lending to small importers using bonded stocks as collateral after forex authorities tightened controls over such business in May, helping to cut demand. Lending on physical imports to the domestic market stayed normal.

Source – Reuters