Chinese Unlikely to Sell Metal Stockpiles Quickly

By Bloomberg News

Oct. 27 (Bloomberg) -- Chinese investors holding metal inventories are unlikely to sell them quickly because of adequate levels of cash on hand, a senior executive at Sucden Financial Ltd., said today.

The downside risk to metals prices is limited due to high liquidity, Jeremy Goldwyn, who oversees business development in Asia for London-based Sucden, said in an interview at a Hong Kong conference. Copper prices may rise to record levels sometime next year, Goldwyn also said. China is the world’s largest consumer of metals.

Inventories of copper at warehouses monitored by the Shanghai Futures Exchange are more than five times the level at the beginning of the year after 4 trillion yuan ($586 billion) in stimulus spending and state stockpiling boosted imports to a record. Prices in London have more than doubled this year on record Chinese imports.

“The view is that China has seen high imports and that these inventory levels were maybe getting excessive and maybe forming a downward pressure on imports and demand, whether people in China might be thinking more of selling,” Martin Squires, executive director at JPMorgan Securities Ltd. in London, said. “The conclusion I came out with was that, no, the inventory level is quite comfortable.”

Consumer stockpiles of copper, excluding government inventories, could be as much as 600,000 to 700,000 metric tons, said Squires, who spoke in an interview at the Hong Kong conference.

Inventories Surge

Inventories of copper at Shanghai warehouses stood at 95,976 tons last week, up from 17,822 tons at the start of the year. China’s copper imports more than doubled in the first nine months to 2.6 million metric tons, according to customs data.

Private Chinese investors may have stockpiled more than 50,000 tons of copper and as much as 20,000 tons of nickel, Goldwyn said on Sept. 17. Chinese smelters may have between 200,000 and 300,000 tons of lead stockpiled, he said then.

Gauging metals demand in China is notoriously difficult amid increased speculation by retail investors, whose holdings remain outside the reporting framework undertaken by exchanges. A possible overhang in supply amid high imports and production threatens to damp demand, Chen Hongzhou, vice manager of the marketing department at Chinalco Luoyang Copper Co., said today.

“There has been record production and very high imports in the first three quarters and there is concern about so-called ‘invisible stockpiles,’ which no one is confident enough to put an estimate on,” said Chen, whose company is a unit of Aluminum Corp of China.

Li Xiaowei, Feiwen Rong. Editors: Richard Dobson, Matthew Oakley.

To contact the Bloomberg News staff on this story: Xiaowei Li in Shanghai at xli12@bloomberg.net; Feiwen Rong in Beijing at frong2@bloomberg.net