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Jiangxi Copper, China’s top producer of the metal, has suspended a programme of exports that had helped to push down world prices, little more than a month after it was launched.
China is the world’s biggest copper buyer, accounting for about 40 per cent of global consumption.
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But in late April Jiangxi and other Chinese smelters surprised metals traders by announcing a rare co-ordinated effort to export copper in response to a domestic glut that had pushed down prices in China relative to the rest of the world.
Western traders had expressed some scepticism about whether the Chinese smelters would follow through on their plans, but since the announcement in late April a total of 52,300 tonnes of copper have been delivered into London Metal Exchange-registered warehouses in South Korea, the closest delivery point to China.
The inflows of metal in Asia have halted a sharp decline in LME inventories, which in May fell to their lowest since late 2008.
That and growing fears about the eurozone debt crisis have pushed the LME price of copper down more than 10 per cent since the end of April. On Thursday, copper prices rose 1.3 per cent to $7,560 a tonne after China cut interest rates for the first time since 2008.
Pan Qifang, board secretary of Shanghai-listed Jiangxi, confirmed the company had suspended its export programme, emphasising that its trades were driven by commercial motives.
Copper prices on the Shanghai Futures Exchange have fallen slightly less than LME prices over the last month, making exporting less attractive.
“Maybe the suspension will be temporary,” said Mr Pan. “If there is a commercial need then we would definitely keep exporting,” he added, noting that Jiangxi’s products are deliverable against LME contracts. Mr Pan declined to reveal how much copper Jiangxi had already exported under the programme.
Traders say that much of that metal that has been delivered into LME warehouses in Korea is likely to be from China, although some of it may have come from shipments destined for China but diverted due to weak demand in the country.
The most recent Chinese trade data for April showed a pick-up in copper exports to 27,000 tonnes, the highest in a year.
Chinese metals traders say fears over slowing economic growth have been partially allayed in recent weeks by Beijing’s efforts to boost growth, which include policies that may help metals demand, such as extending subsidies for home appliances and encouraging subsidies for car purchases.
“We expect the recent stimulus measures will support demand for physical copper in China,” said a senior metals trader in Shanghai.
Additional reporting by Gwen Chen in Beijing and Jack Farchy in London
