Reuters reported that Jiangxi Copper Company Limited high inventories in China are a temporary issue and will gradually come down although end users remain cautious and some expect lower prices and are keeping inventories low.

Mr Li Yihuang chairman of Jiangxi Copper said that he was not worried about slower economic growth in China and forecast copper prices will average USD 8,500 per tonne in 2012 before moving higher in the next few years. London Metal Exchange three month copper was is currently trading around USD 8,000 per tonne.

Mr Li said that "I realize that a lot of people are concerned about a Chinese hard landing and high inventories of copper but personally I am optimistic and expect 6% to 7% growth in copper demand for the next 5 years."

He said that demand from copper cable manufacturing is still very healthy and copper demand from the car manufacturing industry is in very good shape. Consumption of copper tubes which go into white goods, such as fridges however is suffering as inventories for those products in China are high.

Spot treatment and refining charges which are paid by miners to smelters to turn their concentrate into refined metal are currently very low and will likely remain so until the last quarter this year.

Mr Li said that "Starting from fourth quarter it will get better TC and RC will be higher. Mining production from 2013 onwards will increase dramatically, more than refinery capacity. This will mitigate the current weakness of TC and RCs which is good news for smelters."

These charges have been under pressure in recent months due to a shortage of concentrate. Traders reported TC and RCs as low as USD 27 per tonne per 2.7 cents per lb in March down from around USD 35 per tonne earlier in the month.

Jiangxi is now looking to expand in copper mining via acquisitions, partnerships or offtake agreements and it is aiming to reach 40% self sufficiency in copper concentrates supply within the next 5 years.

Mr Li said that this is the first time that I have come to CESCO and the reason I am here is to talk with the mining industry's top executives to seek possibilities of collaboration, investment offtakes these kinds of relationships. I feel very positive about Chile because it is such a resources rich country.

Jiangxi is also planning to expand production of rare earths and other metals such as zinc, lead and gold. It is currently exporting about 8% of its copper cathodes after not selling any material abroad last year. The export increase is not a result of lower domestic demand but rather an attempt to cash in on higher prices abroad.

He added that premiums for Jiangxi copper paid for delivery over the Shanghai Futures Exchange benchmark base price were currently at about 80 renmimbi against a 200 renmimbi discount to the benchmark late last year.

Source - Reuters

(www.steelguru.com)