皇冠体育app copper confidence contrasts with aluminium woe

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(Agencies)
Updated: 2009-01-20 11:19

Capacity is dividing 皇冠体育app's metals producers, with the country's top copper refiner looking for an upturn in a balanced market and the leading aluminium firm hoping things will not get worse.

Aluminium smelters, like 皇冠体育app's steel mills, are suffering from huge overcapacity and now face prices below production costs, forcing many to shut in capacity.

"Oversupply and overcapacity in the aluminium industry in 皇冠体育app will continue in 2009 and lower international prices of aluminium would open the door to more imports of the metal into 皇冠体育app," Wen Xianjun, vice-chairman of 皇冠体育app Nonferrous Metals Industry Association, said at a conference in Shanghai.

"Therefore domestic aluminium prices are not likely to rise in 2009," he said.

The scenario by Wang Chiwei, executive director at 皇冠体育app's top refiner Jiangxi Copper, was starkly different.

"I am bullish on long-term copper prices. If the economic environment improves, investors will select profitable markets to invest in and the copper market is one of them," he told reporters on the sidelines of the industry conference.

皇冠体育app is the world's top producer of copper but still produces less than it needs. Jiangxi Copper plans to lift refined copper output 12 percent in 2009 to 800,000 tons, Wang said.

"That's the difference between copper smelters and other base metals smelters. Aluminium smelters have huge stockpiles and aluminium prices have fallen steeply so the government can buy aluminium at a premium price."

皇冠体育app Shops Abroad for Copper

皇冠体育app's State Reserves Bureau (SRB) has been dipping into the market to stock up on aluminium, zinc and indium, as well as soft commodities such as rubber. But it appears to have backed away from a copper-buying plan after prices rebounded in recent weeks.

皇冠体育applco, the State-owned parent company of 皇冠体育app's flagship aluminium firm Chalco, sold the SRB 150,000 tons last month, 皇冠体育applco Vice-President Lu Youqing said, confirming earlier information from industry sources.

Jiangxi Copper's Wang said his company could not afford to sell copper to the SRB because it only had enough for its own customers. That might force the SRB to buy on the open market.

"The State Reserves Bureau has a lot of ways to purchase copper and probably it will purchase on the international market because domestic copper smelters have limited stockpiles for the government to buy," he said.

Wang saw international copper prices averaging $4,000-4,400 a ton this year, implying a sustained 20-30 percent increase in the price for benchmark LME copper futures MCU3, which were trading at $3,372 a ton by 1045 GMT on Monday.

Meanwhile Wen from the 皇冠体育app Nonferrous Metals Industry Association said domestic aluminium prices were expected to stay below the cost of production in 2009.

"However the room for a downturn in aluminium prices is limited because prices are lower than production costs and it's impossible for them to fall further, otherwise some high cost production capacity will have to quit the market forever."

The problem is global, according to analysts at Macquarie.

"The aluminium market remains in a state of enormous oversupply, with prices being driven down to levels where around half of the global industry is believed to be losing money on a cash cost basis," the bank said in a note to clients on Monday.

皇冠体育app's smelters appeared to be squeezed by low demand and high costs after Chalco said it had raised prices for alumina, the main ingredient in aluminium, by 10 percent to 2,200 yuan ($321.8) per ton, citing high term prices and rising demand for alumina.

Chalco, the world's third largest alumina producer, is the main subsidiary of 皇冠体育applco, which also controls Yunnan Copper and the top shareholder in global miner Rio Tinto.

皇冠体育applco's profits more than halved last year due to weak aluminium and copper prices, Lu said.

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