Commodity Online
Chinese copper consumption is facing bearish sentiments; however, subsequent to adjusting for bonded and SHFE stock fluctuations, the Middle Kingdom?s apparent copper demand has climbed 29% y/y in April and May!
What is wrong (or for that matter, ?right?) here?
Barclays believes that the strength in Chinese refined production and draws in bonded and SHFE stocks is the cause behind this drive. And above all, the changes effected in import finance policy have the potential to boost imports and fuel apparent consumption.
?But how much of this increase in the apparent consumption numbers is driven by ?real? consumption at end-users?? Barclays asks.
It seems that power sector, especially, the grid sector is fuelling the consumption fire. Grid investments jumped 17% y/y in June compared to stagnation in May. No new projects of ultra-high voltage have been approved of. But it seems that the existing lines have reached a stage wherein new outlays are required.
?The gridcos were also investing in numerous smaller, distribution focused upgrades ahead of the summer peak season, and the state regulator urged them to be completed by the end of June, which could have led to a temporary boost,? Barclays report noted.
Given that Chinese consumption of home appliances is coming down, grid demand has become the bright spot in Chinese copper story.
Meanwhile, domestic stocks have been built up in China, thanks to months of strong copper inflows. However, copper imported for financing, this time around, has been cleared through customs rather than getting them parked in bonded warehouses. This was to take advantage of stronger prices and to avoid policy snags.
This would mean more of copper circulating in the domestic markets, taking a toll on apparent demand in the latter half of 2013.
(Story image courtesy of smokedsalmon/freedigitalphotos.net)
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