Copper purchases by China to boost stockpiles may flip the global market from surplus into deficit this year, boosting prices already underpinned by stimulus spending, according to China International Capital Corp.
China’s State Reserve Bureau may raise purchases to 1 million metric tonnes from 600,000 tonnes. The purchases “would easily turn a global surplus of between 350,000 tonnes and 400,000 tonnes this year” into a deficit.
China’s largest investment bank, known as CICC, joins Macquarie Group and BOC International Co in suggesting China may take advantage of the slump in copper prices triggered by the global recession to build up holdings. Copper has gained 25% in London this year after losing 54% in 2008.
GFMS Metals Consulting forecast in a report earlier this month that the global copper surplus may reach 622,000 tonnes this year. Goldman Sachs said in February that it expected all of the base metals to record surpluses in 2009.
The world’s third-largest economy has pledged 4 trillion yuan ($585 billion) in stimulus spending to combat slowing economic growth and has “adequate ammunition” to add to that package at any time, Premier Wen Jiabao said March 13. Building work in China accelerates from March amid warmer weather.