China Shops Abroad for Copper
China’s State Reserves Bureau (SRB) has been dipping into the market to stock up on aluminium, zinc and indium, as well as soft commodities such as rubber. But it appears to have backed away from a copper-buying plan after prices rebounded in recent weeks.Chinalco, the State-owned parent company of China’s flagship aluminium firm Chalco, sold the SRB 150,000 tons last month, Chinalco Vice-President Lu Youqing said, confirming earlier information from industry sources.Jiangxi Copper’s Wang said his company could not afford to sell copper to the SRB because it only had enough for its own customers. That might force the SRB to buy on the open market."The State Reserves Bureau has a lot of ways to purchase copper and probably it will purchase on the international market because domestic copper smelters have limited stockpiles for the government to buy," he said.Wang saw international copper prices averaging $4,000-4,400 a ton this year, implying a sustained 20-30 percent increase in the price for benchmark LME copper futures MCU3, which were trading at $3,372 a ton by 1045 GMT on Monday.Meanwhile Wen from the China Nonferrous Metals Industry Association said domestic aluminium prices were expected to stay below the cost of production in 2009."However the room for a downturn in aluminium prices is limited because prices are lower than production costs and it’s impossible for them to fall further, otherwise some high cost production capacity will have to quit the market forever."The problem is global, according to analysts at Macquarie."The aluminium market remains in a state of enormous oversupply, with prices being driven down to levels where around half of the global industry is believed to be losing money on a cash cost basis," the bank said in a note to clients on Monday.China’s smelters appeared to be squeezed by low demand and high costs after Chalco said it had raised prices for alumina, the main ingredient in aluminium, by 10 percent to 2,200 yuan ($321.8) per ton, citing high term prices and rising demand for alumina.Chalco, the world’s third largest alumina producer, is the main subsidiary of Chinalco, which also controls Yunnan Copper and the top shareholder in global miner Rio Tinto.Chinalco’s profits more than halved last year due to weak aluminium and copper prices, Lu said.