MARKET COMMENTARY
On the surface it looks like China's imports of key commodities were weak in April, with crude oil, copper and iron ore all posting monthly declines. But one month's numbers don't tell the whole story and there are solid reasons behind the fall in commodity imports, and none really alters the base case that China is having a soft start to 2012 but is still a long way from a hard landing.
China's copper imports fell 18.8 percent to an 8-month low in April, preliminary official data showed on today, as a plentiful supply of the metal in the world's top copper consumer curbed its purchases on the international market. The monthly drop had been broadly expected and copper prices showed little strong reaction, while April imports were still 42.9 percent higher than a year ago.
China's copper consumption this year has been weaker than predicted, while the bulk of term shipment orders placed late last year for delivery in 2012 have arrived, lifting copper stocks in the world's second-biggest economy to a record. About 1.1 million to 1.4 million tonnes of refined copper is now stored in China, the highest since 2009, traders and sources at Chinese copper smelters have estimated. The stocks excluded the stockpile of the State Reserves Bureau. Owners of bonded copper stocks in Shanghai had already re-exported some stocks in April and large Chinese smelters agreed to export refined copper cathodes in May and June.
Arrivals of anode, refined metal, alloy and semi-finished copper products fell to 375,258 tonnes in April after dropping 4.6 percent in March to 462,182 tonnes, which itself was the fourth-highest on record.
Traders said weak demand and high stocks had encouraged Chinese importers to sell back partial term delivery of refined copper, the most popular class in the domestic and international markets, to overseas suppliers in April. Some of this metal was still in China last month and was being stored in duty-free bonded warehouses by the suppliers.
Chinese importers have also asked overseas' suppliers to delay or cut term shipments due to arrive in May because of high stocks of refined copper, they said. "I’m not surprised at April’s fall in copper imports given that Chinese demand in the second quarter has been softer than in previous years," said Yang Jun, analyst at China Futures Co. "The arbitrage window for imports into China was not open in April, so consumers who wanted to restock would have gone to the Chinese bonded warehouses where stocks are high," he added.
Copper prices quoted on the London Metal Exchange had touched a three-week low on Wednesday below $8,000 per tonne in London. For monthly basis, it had decreased 2.4 percent at $8,259.63 (-13 percent yoy) in April and the range was $7,885-8,703 per ton.
Today copper was steady and worries about difficulties Greece and Spain face in reducing their sovereign debt kept the red metal under pressure. Benchmark copper on the London Metal Exchange was at $ 8,033 a tonne by 0933 GMT, 0.3 percent down from a last bid of $8,053 on Wednesday.
"Copper is taking a breather after the heavy shake-up across markets we have seen in the past few days but there is still a lot of uncertainty out there: there are concerns about China, about the outlook for Spain, Greece and the euro zone," said Credit Suisse analyst Stefan Graber. Spain on Wednesday took over Bankia, one of the country's biggest banks, aiming to dispel concerns over the government's ability to clean up the financial sector. Greek Socialist leader Evangelos Venizelos will make a last- ditch attempt to form a government on Thursday and avoid a new election after voters rejected a bailout deal and pushed Greece into a political crisis. Unlike the macro outlook though, copper fundamentals pointed to a slightly stronger picture.
Copper inventories in LME-monitored warehouses fell to 219,850 tonnes, hitting a fresh 3 1/2 year low. In the short term, the copper price could remain under pressure, given that China’s import demand has had a major bearing on the price for long periods in the past," Commerzbank said in a research note. "Copper briefly dipped below the $8,000 a tonne mark yesterday to hit its lowest price for three weeks, though it recovered again overnight. It would appear that there is increased buying interest among market players at prices below $8,000 a tonne."
On the surface it looks like China's imports of key commodities were weak in April, with crude oil, copper and iron ore all posting monthly declines. But one month's numbers don't tell the whole story and there are solid reasons behind the fall in commodity imports, and none really alters the base case that China is having a soft start to 2012 but is still a long way from a hard landing.
China's copper imports fell 18.8 percent to an 8-month low in April, preliminary official data showed on today, as a plentiful supply of the metal in the world's top copper consumer curbed its purchases on the international market. The monthly drop had been broadly expected and copper prices showed little strong reaction, while April imports were still 42.9 percent higher than a year ago.
China's copper consumption this year has been weaker than predicted, while the bulk of term shipment orders placed late last year for delivery in 2012 have arrived, lifting copper stocks in the world's second-biggest economy to a record. About 1.1 million to 1.4 million tonnes of refined copper is now stored in China, the highest since 2009, traders and sources at Chinese copper smelters have estimated. The stocks excluded the stockpile of the State Reserves Bureau. Owners of bonded copper stocks in Shanghai had already re-exported some stocks in April and large Chinese smelters agreed to export refined copper cathodes in May and June.
Arrivals of anode, refined metal, alloy and semi-finished copper products fell to 375,258 tonnes in April after dropping 4.6 percent in March to 462,182 tonnes, which itself was the fourth-highest on record.
Traders said weak demand and high stocks had encouraged Chinese importers to sell back partial term delivery of refined copper, the most popular class in the domestic and international markets, to overseas suppliers in April. Some of this metal was still in China last month and was being stored in duty-free bonded warehouses by the suppliers.
Chinese importers have also asked overseas' suppliers to delay or cut term shipments due to arrive in May because of high stocks of refined copper, they said. "I’m not surprised at April’s fall in copper imports given that Chinese demand in the second quarter has been softer than in previous years," said Yang Jun, analyst at China Futures Co. "The arbitrage window for imports into China was not open in April, so consumers who wanted to restock would have gone to the Chinese bonded warehouses where stocks are high," he added.
Copper prices quoted on the London Metal Exchange had touched a three-week low on Wednesday below $8,000 per tonne in London. For monthly basis, it had decreased 2.4 percent at $8,259.63 (-13 percent yoy) in April and the range was $7,885-8,703 per ton.
Today copper was steady and worries about difficulties Greece and Spain face in reducing their sovereign debt kept the red metal under pressure. Benchmark copper on the London Metal Exchange was at $ 8,033 a tonne by 0933 GMT, 0.3 percent down from a last bid of $8,053 on Wednesday.
"Copper is taking a breather after the heavy shake-up across markets we have seen in the past few days but there is still a lot of uncertainty out there: there are concerns about China, about the outlook for Spain, Greece and the euro zone," said Credit Suisse analyst Stefan Graber. Spain on Wednesday took over Bankia, one of the country's biggest banks, aiming to dispel concerns over the government's ability to clean up the financial sector. Greek Socialist leader Evangelos Venizelos will make a last- ditch attempt to form a government on Thursday and avoid a new election after voters rejected a bailout deal and pushed Greece into a political crisis. Unlike the macro outlook though, copper fundamentals pointed to a slightly stronger picture.
Copper inventories in LME-monitored warehouses fell to 219,850 tonnes, hitting a fresh 3 1/2 year low. In the short term, the copper price could remain under pressure, given that China’s import demand has had a major bearing on the price for long periods in the past," Commerzbank said in a research note. "Copper briefly dipped below the $8,000 a tonne mark yesterday to hit its lowest price for three weeks, though it recovered again overnight. It would appear that there is increased buying interest among market players at prices below $8,000 a tonne."
