* To wait until factories end Lunar New Year break in Feb
-trade
* Recent official data improve consumption outlooks by
plants
By Polly Yam
HONG KONG, Jan 11 (Reuters) – Most users of refined copper
in China, the world’s largest consumer of the metal, will hold
off on spot purchases until March, despite brighter prospects
for consumption, preferring to wait until factories re-open
after Lunar New Year celebrations.
Though recent manufacturing and exports data have been
strong, expectations for factories to shut or slow operations
for a couple of weeks around the holiday on February 10 will dry
up demand, following a pattern in previous years, traders say.
“It’s hard to sell physical copper,” said a trader at a
large Chinese trading firm. “Plants are preparing for the Lunar
New Year holidays and may not buy spot metal until late February
or early March.”
The experience of previous years supports this contention.
Copper stocks monitored by the Shanghai Futures Exchange surged
65 percent last year in the month before the festival on January
23, for example.
In the absence of official data on real consumption, Reuters
calculations of implied consumption suggest monthly demand for
refined copper fell 17.7 percent in January last year while
monthly consumption surged 20.8 percent in February.
This year, purchases by plants that use refined copper to
make semi-finished items like rods and plates have been weak,
although a few plants received more orders in January than in
the prior two months, traders and manufacturing sources said.
“Plants received a bit more orders. Their expectations on
consumption have improved,” said a purchasing manager at a
listed firm that uses plates to make electronic parts, adding
that strong prices were deterring plants from adding to stocks.
Benchmark LME three-month copper hit a one-week peak
of $8,165 a tonne on Thursday, supported by strong exports from
China. The price stood at $8,129 on Friday, up 2.5 percent so
far this year after a rise of 2.6 percent for all of 2012.
IMPROVING DATA POINTS TO RECOVERY
After China’s economic slowdown trimmed demand last year,
buyers and merchants were pessimistic on the outlook for
consumption in the fourth quarter, but forecasts have perked up
after data pointed to signs of a recovery, traders said.
Trade data on Thursday showed the value of China’s exports
grew 14.1 percent last month from a year earlier, racing past a
forecast of 4 percent in a Reuters poll.
Activity in the vast manufacturing sector in December hit
its fastest pace since May 2011, a survey of private factory
managers showed last week.
China’s power grid will increase spending by 4 percent this
year, up from growth of 1.3 percent last year, domestic media
reported this week, which would help boost copper and aluminium
demand, Barclays Bank said in a report.
“Production at our plant has returned to normal after
orders fell last year,” said a manager at a large plant which
produces tubes used in cooling systems, which saw additional
orders from China, the United States and southeast Asia.
“Our orders increased in December and then rose further in
January,” he added, with January orders doubling from a year ago
to more than 30,000 tonnes. His plant expects orders to rise
strongly in March and April, to about 40,000 tonnes a month.
Although he said orders to large plants making
higher-quality copper plates and sheets had risen, smaller
plants had not benefited equally.
State-backed research firm Antaike forecast China’s refined
copper consumption to rise 5.5 percent to 8.1 million tonnes
this year, outstripping an expected rise of 4.8 percent in 2012.
Still, buyers of refined copper are watching for convincing
evidence of a recovery.
“None of the plants we know are increasing copper purchases.
We will buy more when we see solid evidence of a recovery,” said
the purchasing manager, who did not want to be identified
because he was not authorised to speak to the media.
Plants in China would buy more refined metal if the price
fell to $7,500 to $8,000, traders said.
REFINED COPPER OUTPUT AT RECORD
China’s refined copper output hit a record 531,000 tonnes in
November, and December output is expected to stay strong.
Supply is plentiful, with thousands of tonnes in bonded
stores, although stocks have fallen slightly in the past month
from November’s record.
Plants expecting to wind down production in the next three
weeks have been buying spot copper hand-to-mouth, while those
with metal stockpiles are running them down close to the holiday
and may rebuild the stocks after the break, the first trader, at
the large Chinese trading firm, said.
“Before the Lunar New Year holidays plants would be cautious
on buying. We don’t see a pickup of the buying until March,” a
trader at an international trading house said.
(Reporting by Polly Yam; Editing by Clarence Fernandez)
