Copper stocks piling up in Shanghai are weighing on the metal's premiums in China, slowing down massive imports of the red metal, traders said.
Traders estimated there were more than 200,000 metric tons in Shanghai, including 92,912 metric tons of official exchange stocks in the week ended on July 17.
Coupled with slack off-takes, this trimmed the metal's premiums to $85 per metric ton, CIF Shanghai, even for the most popular brands, from $90 last week and $120-$130 late in April, they said. Some less popular SXEW copper was available at premiums below $40.
"The stocks in Shanghai are very high," said a trader based in Beijing. "Interest from consumers is not that strong at the moment because it is also summer time."
The copper concentrates market has also cooled, and traders saw spot trade done at treatment and refining charges slightly above $20 a metric ton and 2 cents a pound, well below the level about one month ago.
Still, not all traders agreed Chinese copper smelters had covered their need for feedstock for the rest of the year.
"It's quiet. But in principle nothing has changed. Chinese and Indians want to buy more if any cargoes were available," said an industry source in Tokyo.
Another trader in Shanghai agreed, saying: "I think the production is suffering from the (concentrate) supply shortage."
Despite copper concentrate shortages over the past several months, official data showed China's refined copper output was up 10.5 percent at 848,800 metric tons during the first half.
In the aluminum market, Asian traders saw inquiries from China in otherwise quiet trade despite persisting backwardations on the London Metal Exchange (LME), where three-month prices are lower than spot prices.
"It is pretty quiet except for inquiries from China," said an industry source. "They are still exporting but not as many as in the past."
China has become a net exporter of aluminum but both imports and exports the industrial metal, using its exports to pay for the import of the raw material alumina.
Traders said Chinese aluminum was headed mostly to large consuming countries such as South Korea or Japan, and little was being shipped to LME warehouses in Singapore.
Premiums in Singapore for Chinese aluminum were seen down at around $20-$30 per metric ton, reflecting the backwardation that discourages holding on to the metal.
Despite some optimism in China about growing aluminum production, international traders and industry sources remained skeptical due to power deficits in China and the global shortage of alumina.
"They are still short (in alumina). It's still the same," said another industry source based in Beijing.
"They worry about getting raw material after they build their plant. They don't plan the key raw material input rather than financing from the bank, which is easy."
The source and others said spot alumina prices were still above $300 per metric ton, CIF China, versus around $160 in November.
Asked about power, the Beijing source said: "It is a little bit of an issue in some provinces: 15 provinces at this stage...Smaller smelters that are paying not so much will be sacrificed." Reuters