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G. Chandrashekhar

Lower supply growth, increasing consumption in Asia

Mumbai April 25 The copper market was in surplus of 40,000 tonnes in January 2007, considerably down from 204,000 tonnes surplus in December 2006 and 1,40,000 tonnes surplus in January 2006, according to latest data released by the International Copper Study Group (ICSG).

Consumption

The world refined copper output in January this year stood at 1.547 million tonnes (mt), while the use amounted to 1.507 mt, ICSG data showed.

World refined copper use was estimated to have risen six per cent year-on-year from January 2006.

The rise is attributed to growth, primarily in Asia.

Chinese apparent usage rose by 27 per cent and use in India and Japan was up by 17 per cent and nine per cent respectively, analysts said.

Supply situation

On the supply side, data indicated that world mine production in January this year grew by nine per cent.

However, it was 4.5 per cent below the average monthly production for the fourth quarter of 2006 and seven per cent lower on a month-on-month basis from December 2006 production.

Total world refined production in January this year rose eight per cent year-on-year.

Copper prices have gained support from Chinese metals data released earlier this week and are trading above $8,000 a tonne.

There was continued growth in China's refined copper imports in March 2007, with refined copper net imports coming in at very close to 200,000 tonnes, posting an all-time high and eighth straight month of growth.

In bulls' grip

The zinc market is already under a bull grip, following release of Chinese trade data. The metal was trading above $3,800 a tonne.

China's zinc concentrate import growth picked up pace in March. Imports increased by 148 per cent year-on-year during the first quarter.

This has helped to fuel growth of 26 per cent in refined metals production, while domestic zinc in concentrate output fell by about three per cent.

Despite sustained strong growth in refined metal output during the first three months of the year, China's net exports fell sharply in March. Experts attribute this to possible de-stocking during the end of 2006 and beginning of this year - in line with period when next exports increased.

However, de-stocking may be coming to an end and re-stocking may begin.

Lower volume

Together with sustained robust domestic demand, the volume of refined zinc leaving China could be lower over the coming months, said analysts.

There are reports of a proposed VAT rebate cut to special high-grade zinc and possible five per cent export tax on refined metal. If this materialises, the incentive to export will be significantly reduced.

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