Don’t Believe Chinese Copper Numbers

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By Greg Peel

The International Copper Study Group suggests the world copper market will reach a 100kt surplus in 2006. This represents over 1% of total consumption.

Bollocks, says Citigroup.

Citi believes the ICSG has failed to properly account for changes in China’s "unreported" stocks. Its apparent consumption calculations are erroneous if an estimate for unreported stock changes is not included.

Anyway, look at the parameters, says Citigroup. There is no evidence of a large surplus. The Shanghai-LME price premium is stable, producer-consumer stocks are unchanged and LME stock levels are actually declining. Chinese copper imports rose throughout the first half of 2006 inferring, Citi says, China’s copper demand is robust.

Unreported Chinese stocks are not to be ignored, the analysts warn. The Chinese are masters at not revealing their hand, and last year the State Reserve Bureau threw the market completely when it suddenly short sold 200kt worth of copper.

Citi reports that recently the SRB exported 30kt of metal to the LME’s Korean warehouse, reducing net imports, and has sold 90kt locally. The implication is that other s

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