China`s copper demand hinges on power sector, credit: industry
Source: www.chinamining.org Citation: Reuters Date: September 4, 2014
An employee works at a electricity cable factory in Baoying, Jiangsu province, July 23, 2006. |
China`s consumption of refined copper in the rest of 2014 may hinge on new orders from the power sector, where investment recorded a rare fall in the first half, and on bank lending, as tight credit conditions have cut demand from smaller end-users.
The power sector accounted for nearly half of copper demand last year in China, the world`s top consumer and producer. A drop in orders from the sector could cut China`s appetite for imports, a driving force of prices in the international market.
Investment in new power networks had been expected to rise more than 10 percent this year, industry sources said, but in the first half investment fell 0.6 percent from a year before, according to data from industry body China Electricity Council.
"If investment in the power sector doesn`t rise in the second half, we`ll have to adjust down our consumption forecast for 2014," said Yang Changhua, a senior analyst at state-backed research firm Antaike Information Development Co.
Antaike has forecast that China`s consumption of refined copper would rise 6.7 percent from last year to 8.75 million tonnes.
State Grid Corp of China, the dominant investor in power networks, said in May it was being audited, which industry sources said was likely to have slowed network investment. It was unclear what the aim of the audit was.
Antaike`s Yang said audits of firms in China usually slowed investment because decisions took longer to be made and it was not clear when the auditing at State Grid would be completed.
TIGHT CREDIT
Chinese banks have tightened lending since June because of a probe into an alleged metal financing scam, which has forced small traders of refined copper to delay some term shipments, cutting imports to a 14-month low in July. [MTL/CHINA1]
Tight credit and fewer orders from the power sector have also forced some small copper rod and wire producers to close as the industry has surplus capacity, the industry sources said.
Rods and wires, mostly made from refined copper, are used to manufacture power cables and wires.
Some medium-sized rod and wire producers are also facing a credit crunch, said a trader at a large plant in southern Guangdong.
Jiangsu Zhongtong Copper, a medium-sized producer with 200,000 tonnes of capacity in eastern Jiangsu province, has told at least one foreign supplier it has been unable to get letters of credit (LCs) from banks for refined copper imports and wanted to delay term shipments, four trading sources said.
"Jiangsu Zhongtong told us they couldn`t obtain LCs," said an Asian-based trader at an international trading firm that had planned to ship 1,000 tonnes of refined copper a month to Jiangsu Zhongtong between September and December.
Jiangsu Zhongtong wanted to delay the shipments to next year as it was still in talks with banks, he added.
A senior executive at Jiangsu Zhongtong declined comment.
Traders said importers were not keen to buy spot copper, while sellers were not accepting low premiums.
Premiums for bonded stocks were at about $90-$100 a tonne over cash prices on the London Metal Exchange this week, flat from a month ago.
Stocks in bonded warehouses in Shanghai were about 500,000-550,000 tonnes last Friday, down from 570,000-600,000 tonnes in early August due to low imports, three traders estimated.
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