China's total copper imports surged 41.5 percent to a record last month, data showed, topping expectations on state-backed strategic buying and after stronger Chinese prices had spurred merchants to raise spot imports.
The data follows other signals -- both macro-economic and in the metals market -- that the Chinese economy and its demand for raw materials is emerging from the steep downturn seen late last year, a supportive sign for beaten-down global commodity prices.
China, the world's top consumer of copper, imported 329,311 tonnes of unwrought copper, including anode, refined and alloy, and semi-finished copper products in February versus 232,701 tonnes in January, the General Administration of Customs said on its website on Wednesday. (www.customs.gov.cn)
The Feb imports were bigger than we had expected. The big imports should have come from higher inflow of refined copper due to SRB's buying and the spread between Shanghai and LME prices, Jing Chuan, chief researcher at Great Wall Futures in Shanghai said.
China will give details on imports of refined copper alone, which accounts for three-quarters of imports, in about two weeks.
Analysts and traders had expected February's refined copper imports to surpass December's record high 211,527 tonnes after the arbitrage for importing copper from London Metal Exchange warehouses gapped wide on restocking by end-users and repairs at some Chinese smelters including Yunnan Copper (000878.SZ: Quote).
State-backed stockpiling also pushed up imports.
The State Reserves Bureau, which is Beijing's commodity stockpile management arm, is believed to have contracted about 300,000 tonnes of imports to build strategic stockpiles, most of it arriving in the first half.
The high level of copper imports has been caused by the strong arbitrage opportunities and a big number was expected...so a record high for refined copper will come as no surprise, Yingxi Yu, analyst at Barclays Capital in Singapore said.
The decline in aluminium exports was also expected, highlighting the relative strength of domestic prices.
Traders also said fabricators have been buying copper to resume production after the Lunar New Year break in late January and early February, and also to rebuild inventories, suggesting that end-user demand may also be on the mend.
We are willing to stock up more copper. There is little room for Chinese prices to fall, an executive at a trading firm in Shanghai said. He added the firm had paid a premium of $160 to import copper for prompt delivery last week, more than double of the yearly premiums.
Traders said fabricators had bought more refined copper to build stocks at 25,000-27,000 yuan per tonne.
A source at fabricating plant Chinalco Luoyang Copper said that large copper fabricators were operating at nearly 90 percent of capacity versus about 50 percent in late December.
Our operation rates rose 10-20 percent in February from January, the source told Reuters, adding that China's stimulus plan to boost domestic consumption was strengthening demand from the power, transport and telecommunication sectors.
Imports of refined copper may rise further by 20,00-30,000 tonnes in March from February due to increased spot orders by merchants and fabricators if margins stayed attractive, said Zhu Yanzhong, analyst at Jinrui Futures, a subsidiary of of top Chinese producer Jiangxi Copper.
A manager at a large trading firm in China said he estimated imports could reach as high as 300,000 tonnes in March, although others noted that the recent collapse in premium of Shanghai copper futures SCFc3 to LME MCU3 could temper imports.
The spread ballooned as wide as over 2,000 yuan per tonne in January and 1,900 yuan in February but has now shrunk to below 400 yuan.
China, also the world's top producer and consumer of aluminium, imported 60,074 tonnes of unwrought aluminium and semi-finished aluminium products in February, up 6.6 percent from January, as Chinese prices had stayed stronger after the SRB bought 590,000 tonnes of primary metal in December-February.
Strong domestic prices pushed down exports of unwrought aluminium to 10,992 tonnes in February, down 37.7 percent from January. (Additional reporting by Tom Miles in BEIJING)
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