China's State Reserves Bureau could have suspended planned copper purchases due to rising prices, an official aware of the government's plans and a producer said on Monday, but zinc buying will resume this week. "We previously had a plan to build up copper reserves but it now seems we've had to suspend it," said the official, adding, "It's because of the price," without elaborating.
Copper prices on the London Metal Exchange and Shanghai have risen since Beijing indicated it would buy base metals reserves in December. However LME copper, which had been up 13 percent this year, slipped 6 percent on Monday due to doubts about Chinese purchases. Producers were also sceptical the government would buy copper in the short term.
"Copper prices have risen. The SRB of course won't follow the price. They can just wait for a while," said Pan Qifang, spokesman for Jiangxi Copper Co Ltd, the country's top copper producer. Shanghai's most active copper futures contract, for April delivery, rose 1,180 yuan to 28,190 yuan ($4,123) on Monday, despite talk that the SRB had cancelled the copper buying plan. "The SRB may watch the market after the Lunar New Year. If local demand is bad, it may buy as reserve," the spokesman said.
Last month the SRB considered buying 700,000 tonnes of copper from three smelters, including Jiangxi copper, and later invited large smelters and trading houses for a 200,000-tonne bidding round out of a 500,000-tonne purchase plan.
Jing Chuan, chief researcher for Great Wall Futures in Shanghai, said the SRB was unlikely to cancel the plan to buy copper as reserves because it was part of the central government's resources buying plan. One source said the State Reserves Bureau (SRB) may have already placed a contract to buy 300,000 tonnes of physical refined copper cathode, about one month's production in China, from a Chilean producer with monthly delivery of 25,000 tonnes this year. Smelter and industry sources said the SRB met senior executives at copper smelters last Wednesday but purchasing did not seem to have kicked off.