EMERGING Chinese copper demand after a summer factory lull and buying by traders buoyed by cheap premiums and weak global prices looks set to fuel a recovery in China’s copper imports this month after a plunge to 12-month lows in August.

    The buying interest could help stem a surge in Chinese copper exports, but may not be enough to offset the impact of an expected flood of new supply this year, traders and analysts said, putting further pressure on prices into 2017.

    “We’re coming out of the summer lull,” said analyst Matthew Wonnacott of CRU in Hong Kong. “But in terms of demand, we’re still a little bit cautious.”

    While a pick-up in Chinese home prices was fuelling fresh real estate development, huge copper orders from China’s power sector that had propped up demand in the first half were set to fade, Wonnacott said.

    CRU expects China’s copper demand growth to slow to 0.8 percent in the second half, from 2.1 percent in the first half. It sees prices averaging US$4,700 a ton in Q4, up from around US$4,600 a ton currently, then falling to below US$4,500 in 2017 as mine supply grows.

    China is a net copper importer, but has been increasingly been producing refined material from imported concentrate.

    China’s improved copper demand has been reflected in a rise in premiums to US$50 last week from around four-year lows at US$45, and in the first drop in China’s bonded inventories since April, according to brokers.

    “We believe this reflects improving onshore demand in September, supported by both seasonal trends and a rebound in activity in southern China following flood-related disruptions in July,” Standard Chartered said in a report.

    “Feedback from fabricators onshore also points to a pick-up in orders from the construction sector in recent weeks.”

    Prices not far from six-year lows and historically cheap premiums had convinced some traders to stock up. Local prices are still below global prices, meaning traders take a loss to import metal, but bank on a rise in prices or higher yielding opportunities elsewhere.

    “The import loss was at a level that became a bit more bearable, so there is going to be a bit more imports of metals moving from bonded to China stocks from late August to September,” said a trader at a merchant in Singapore.

    Still, an oversupply in China is unlikely to quickly disappear. Exports of its surplus requirements helped boost LME copper stocks by 60 percent in the past month.

    And despite signs of a pick-up, end-user demand could still face headwinds.

    “I think we’re going to have a slower Q4 across all industrial commodities. Not a storm but we could see some corrections into the fourth quarter,” the trader said.(SD-Agencies)