Chinese Unlikely to Sell Metal Stockpiles Quickly

Chinese investors holding metal inventories are unlikely to sell them quickly as they have adequate levels of cash on hand, an executive at Sucden Financial Ltd., said today.

The downside risk to metals prices is limited because of 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.

Copper on the London Metal Exchange declined 0.5 percent to $6,579.5 at 5:23 p.m. in Hong Kong. The metal reached a record $8,940 a ton in July last year.

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.

“In our case, our copper inventories in October rose 25 percent from the level last year,” said Wang Jianli, executive director at Xingye Copper International Group Ltd, a Hong Kong- listed company that makes copper plates and strips. “There has been also the rise in speculative investor interest in copper stockpiles. Many people hoard copper cathodes and scrap in Guangdong, Zhejiang and Jiangsu,” he said, without elaborating.

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.

‘Invisible Stockpiles’

Gauging metals demand in China is difficult amid increased speculation by retail investors, whose holdings remain outside the reporting framework undertaken by exchanges. A possible overhang in supply on 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.

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