Chinese copper stocks not as high as some think :Macquarie Research,

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Chinese copper stocks not as high as
some think
Feature article
 At the International Copper Study Group meetings in Lisbon in late September,
China’s CNI-A submitted an “official” estimate of the country’s copper stocks,
which has been now picked up and widely reported in the mainstream media
over the last 24 hours. The high level of stocks reported, and the apparent
stockbuild that these data suggest has taken place over the last two years,
have sparked much enquiry and debate. However, we have substantive
doubts about the veracity of these data, both in terms of the absolute level,
which we think is overstated, and especially the scale of stockbuild that is
suggested, which we think is implausible in the context of all other available
evidence and market signals.
Latest news
 LME base metals prices took a tumble in trading on Thursday, with tin falling
furthest to finish 4.4% down on the day, while copper closed with a loss of 2.9%,
as worries over slower growth in China’s economy resurfaced and the dollar rose,
despite Slovakia’s parliament voting to approve the enhanced EFSF, thereby
completing its formal ratification by the 17-member Eurozone. Precious metals
prices also fell, with silver sliding 2.8% and gold giving up 1.5% to settle at
$1,656/t.oz in the PM fix.
 Chinese spot copper premiums remain robust, according to the latest data
from basemetals.com, with quotes of up to $150/t CIF Shanghai for Grade A
cathode, supported by physical buying. However, European spot aluminium
premiums continue to retreat from recent record levels as availability has
increased and demand subsided.
 China’s imports of unwrought and fabricated copper products increased by
16% MoM and 3% YoY to 4.6mt on an annualised basis in September.
However, imports over the third quarter as a whole were 6% lower than in the
corresponding period a year ago. We estimate that refined copper imports
were close to 270kt in September, the highest since May 2010.
 China’s iron ore imports rose 6% MoM and 15% YoY to 737mt on an
annualised basis in September. Total imports in the third quarter were 10%
higher than in Q3 2010. In addition to these imports, there is probably another
5mt+ of imported Pilipino nickel ore which is being used as iron ore this year.
 China’s exports of finished steel products rose 4% MoM and 40% YoY in
September to an annualised rate of 51.2mt. Meanwhile imports increased
only marginally, with gains of 2% MoM and 1% YoY to an annualised rate of
16.2mt.
 China’s coal imports steamed ahead in September to reach 244mt at
annualised rate, which marked a rise of 43% YoY, while exports fell by 35%
on the same comparison to only 14.7mt at annualised rate. While the scale of
the increase in imports, which appears to be have been driven mainly by
thermal coal, was more we might have expected, the direction comes as no
surprise.