China to Re-Export Copper as Stockpiles Mount, Xi’an Maike Says

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Interesting turn of events.

China to Re-Export Copper as Stockpiles Mount, Xi’an Maike Says

Nov. 10 (Bloomberg) — China, the top copper user, holds as much as 350,000 metric tons in duty-free warehouses and the metal may be re-exported as supplies outpace demand, according to Xi’an Maike MetalInternational Group.

“We can hardly find buyers for refined copper,” said Luo Shengzhang, general manager of the copper department at Xi’an Maike. The
company ranks among the country’s three biggest importers, according to the executive. “China’s got to export some copper from now and next year,” Luo said in an interview.

Copper, used in pipes and wires, has more than doubled in London this year as China’s 4 trillion yuan ($586 billion) stimulus spending,
increased state stockpiling and a lack of scrap material boosted imports to a record. That’s helped to drive Chinese prices below London’s sinceat least July.

Xi’an Maike has had to re-route some bonded copper to London Metal Exchange warehouses in South Korea because the company was unable to find buyers in China, said Luo, who spoke yesterday in Shanghai. The effect of the stimulus package was wearing off and local scrap supply was improving, he said.

Luo’s estimate of the bonded-zone stockpiles compares with 60,000 tons by Macquarie Group Ltd.  in July. It’s also more than triple the
inventory in Shanghai Futures Exchange warehouses, which stood at 104,275 tons as of the week of Nov. 2. A bonded zone holds imported goods before duty has been paid.

                     Copper’s Rally

Three-month copper in London traded today at $6,548 a ton compared with $3,070 at the end of last year. Futures in Shanghai have also more than doubled this year to a high of 51,580 yuan ($7,554) a ton today.

Still, buying the metal from overseas to sell in the Chinese market has not been profitable since at least July, according to Bloomberg
calculations. Prices in Shanghai were more than 1,300 yuan a ton lower than London yesterday, after accounting for China’s 17 percent value
added tax.

In addition to the bonded-zone stockpiles, China may also hold 150,000 tons in the Shanghai area, including in exchange- monitored
warehouses; 235,000 tons at the State Reserve Bureau, which maintains government holdings; and 200,000 tons with fabricators and private
investors, Luo said.

Refined-copper exports by China were 10,705 tons in September, 70 percent more than a month ago and the highest this year, according to data by the Beijing-based customs office. Refined-copper imports in the first nine months were 2.58 million tons, 165 percent more than a year ago.

Xi’an Maike’s inbound shipments of refined copper may total about 400,000 tons this year, ranking among the top three importers by volume, according to Luo. The country’s imports of refined copper may halve to 1.6 million tons in 2010 from an estimated 3 million tons this year, he said.