China’s probe into suspected fraud in metal-backed financing at Qingdao port had sent jitters through copper traders earlier this year, but those fears are now subsiding and giving way to expectations the red metal may rebound.
A government investigation was initiated early this summer after it was reported that several warehouse operators in the port city were offering the copper in their stores as loan collateral to several different Chinese banks. Metals are widely used as loan collateral in China. In the wake of the Qingdao probe, a long-existing arbitrage opportunity on copper imports had disappeared with a so-called copper premium in China shrinking. Prices in China’s bonded warehouses slipped below London prices, but the difference has been narrowing in recent weeks, Ivan Szpakowski, a commodities strategist at Citi Research, told the Wall Street Journal.
Several metal traders liquidated their stocks as credit for metal-backed financing dried up, but now the selling is largely over and those holding stocks in warehouses have financers, he said, adding that it was hard to estimate how much metal was sold.
While imports of the metal fell by 12% in August to 340,000 metric tons from a year ago in the wake of Qingdao investigation as well as slowing housing sales, there is widespread expectation that purchases by the world’s largest consumer may once again be bolstered by demand from state-run power stations.
Weakening prices changed direction when the price of Chinese copper bar rose 0.8 percent on Tuesday, September 16 to CNY 50,220 ($8,176) per metric ton. After falling for two days, the Chinese copper cash price rose 0.8 percent to CNY 50,420 ($8,209) per metric ton. The price of Chinese copper wire continues hovering around CNY 50,395 ($8,205) per metric ton for the fifth day in a row. The price of Chinese bright copper scrap held steady at CNY 44,300 ($7,213) per metric ton.
The price of US copper producer grade 122 weakened by 0.5 percent, settling at $3.79 per pound. The price of US copper producer grade 110 saw a 0.5 percent decline to $3.79 per pound. The price of US copper producer grade 102 fell 0.5 percent to $3.98 per pound. The cash price of primary Japanese copper declined 0.1 percent to JPY 767,000 ($7,158) per metric ton.
The 3-month price of copper weakened by 0.2 percent on the LME, settling at $6,820 per metric ton. The cash price of primary copper saw little movement on Tuesday on the LME, closing out around $6,849 per metric ton.