Lisbon, Portugal 09/03/2016 - Chinese refined copper imports will drop almost 12 percent to a 'new normal' in 2016, due to slowing demand growth and higher domestic production, Chun Shen of Chinese broker JCC Jinrui Futures said.
JCC sees imports of 3.25 million tonnes of refined copper into China in 2016, down 11.6 percent on the 3.678 million tonnes imported in 2015 and also down on the 2014 total, Shen said at the Metal Bulletin Copper conference here.
"As a soft demand outlook and overcapacity narrows the demand gap, China's refined copper imports are expected to drop in the coming years," he said.
JCC expects copper consumption in China to reach 10.58 million tonnes this year, with domestic output of 7.8 million tonnes.
The rising costs of financing and tighter availability of letters of credit should lead to a further unwinding of Chinese copper financing assets, Shen said.
"The trend of unwinding Chinese copper financing deals and a softening of import demand indicates a new model that tends to be profit driven [on price rather than through credit arbitrage]," he added.
Despite Codelco lowering premiums in annual contracts to $98 per tonne this year from $133 in 2015, Chinese consumers and traders have signed up in lower numbers.
"2016 contract volume signed by traders has shrunk by 20-40 percent, as the 2016 contract premium is much higher than there average Yangshan [domestic] copper premium of $85 per tonne in 2015," Shen said.
(Editing by Mark Shaw)