Small Chinese importers delay term copper shipments amid lending cuts
Small importers of refined copper in China are likely to delay term shipments, at least in the coming two months, as local banks cut lending following a probe into an alleged metal financing scam in Qingdao, trading sources said.
Fewer term copper shipments going to the world’s top copper consumer could create extra supply in the international market, putting further pressure on copper prices, which were at a two-week low on Wednesday.
The probe at Qingdao Port in Shandong has led Chinese banks to freeze or cut credit to metal trading firms in the province after the alleged fraud came to light in early June, the sources said.
Banks have also tightened lending for metal importers in Shanghai, preventing smaller trading firms with weaker financing power than larger rivals from taking term refined copper imports, they said.
“Importers who have delayed term shipments are mostly from Shandong and got credit axed by banks. They said they would not be able to take term shipments in the coming two months,” said a China-based trader who works at an international trading house.
Some delayed term copper has been stored in bonded warehouses in Shanghai by suppliers, the trader said.
A second trader at a large Chinese trading house said a client in Shanghai had failed to get a letter of credit for less than 1,000 tonnes of term copper imports last week.
Larger importers have generally not been affected by the tighter lending and have continued to take term shipments, traders said.
Prices fell after importers shifted stocks out of bonded warehouses in Shanghai last month for resale in the domestic market in response to tighter credit conditions, they said.
Reflecting increased supply, spot copper fell below the most-active Shanghai futures contract for the first time on July 25. Spot was 220 yuan (HK$276) above the most-active contract price on Tuesday at 50,760 yuan, still well below the year’s peak in April when it was 3,590 yuan higher.
“There’s a lot of metal in the market and now is the seasonal low demand time,” added a trading manager at a state-owned copper producer.
Refined copper stocks in bonded warehouses in Shanghai are at about 570,000 to 600,000 tonnes currently, four traders estimated, compared with 600,000 to 650,000 tonnes in early July.