Abstract On June 5th, in the past week, China's refined copper imports have increased, as banks loosen credit and the arbitrage window opens. China is the world's largest consumer of copper. Minute
On June 5th, in the past week, China's refined copper imports have increased, as banks have relaxed credit and the arbitrage window has opened. China is the world's largest consumer of copper.
Analysts said that China's copper imports have increased or provided support for international copper prices. Since the beginning of the year, international copper prices have fallen by 6%, due to the lingering concerns of the global economy.
Since mid-May, it has become more difficult for Chinese copper importers to obtain financing from banks, as banks have reduced the scale of lending to importers and wait for regulatory authorities to issue more detailed operational guidelines for controlling exchange rate speculation.
But when foreign exchange regulators provide more detailed regulatory targets, concerns about importers' access to financing and China's copper import demand have eased.
A senior person from an international trading company said that "the copper import trade has reappeared. It seems that the bank is more flexible in opening letters of credit, because the regulatory rules have been made clear."
The high-level person asked for anonymity because he was not allowed to comment on the issue.
However, it is still difficult for small importers who trade copper inventories of bonded warehouses for financing needs to obtain a letter of credit issued by the bank.
At present, China's large and medium-sized traders and terminal consumers have been able to obtain letters of credit issued by banks to conduct bonded copper trade or import spot copper, as banks have provided clear operational guidelines.
However, banks are still reluctant to open a US dollar letter of credit, preferring to issue a RMB letter of credit, but some banks can issue a US dollar-denominated letter of credit of 3 months to 9 months.
A large trader said, "The latest banking regulatory requirements have little impact on the copper trade. The arbitrage window is still open, which boosts China's import demand."
He refers to the price difference between domestic spot copper prices and imported copper prices.
On Wednesday, the Shanghai spot market copper price was reported at 54,010 yuan ($8,800) per ton, not far from the one-and-a-half-month high of $54,235 per ton touched last month.
In early May, LME three-month copper fell to a low of more than a year to below $6,800 per ton.
Improvements in arbitrage space have increased copper premiums in Shanghai bonded warehouses to $140-150 per ton, an increase of 7-15% from the level in mid-May.
A medium-sized refined copper trader said that domestic copper demand is generally stable, but domestic producers' supply should decline. Many people have ordered shipments for long-term shipments.
The increase in arbitrage trading will lead to a decline in the copper inventory level of the bonded warehouse in Shanghai.
Traders estimate that copper inventories in Shanghai bonded warehouses have fallen below 500,000 tons in late April to below 500,000 tons, the lowest level since March 2012 and less than half of the 1 million tons in late January.
Analysts said China's demand for imported refined copper will increase as domestic producers cut output due to shrinking supplies of scrap copper.
Data show that China's refined copper imports fell to a record low of 183,023 tons in April, mainly due to delays in shipments by Chilean port workers and the closure of India's largest copper smelter due to environmental concerns.
Analysts expect China's refined copper imports to increase in May, so the previously delayed shipments arrived and importers increased their purchases.
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