WASHINGTON Chinese copper imports are set to drop sharply as the country rebalances its economy after a booming period of growth, an analyst at Commodities Risk Management Associates (CRM) said.
Copper imports in recent years have been sitting in warehouses for financing purposes, but have since been re-exported to London Metal Exchange warehouses, Far Hills, N.J.-based CRMs Nicholas Sarro-Waite said.
The Chinese government is clamping down on the shadow banking sector that financed the imports and metal warehousing, he said, adding that this is already having serious consequences for copper in terms of stocks.
"Visible warehouse stocks have risen above the 2009-11 peak. Just how big is this iceberg under the water?" he asked.
Theres a high probability that copper demand could drop further from 2015 to 2020 as China rebalances and investment stagnates, Sarro-Waite said.
On this basis, annual surpluses of more than 1 million tonnes will start from 2014, he said April 25 at the American Copper Councils meeting in Washington.
"The implications are the copper prices drop to the marginal cost, and that there are dramatic supply cuts," Sarro-Waite said.