2012 Oct.

China Sept copper output robust on tight scrap supplies

Chinese copper production matched its second-highest level this year in September as tight scrap supplies and favourable export policies encouraged smelters to keep output high, although primary aluminium output dropped from a record high in August.

  Metal demand in China, the world's top consumer and producer of copper, aluminium, lead, zinc, nickel and tin, has fallen this year after economic activity slowed in global markets.

  But hopes that appetite will rebound in the fourth quarter and early next year on the back more infrastructure spending have encouraged miners and smelters to ramp up production.

  Refined copper output rose 4.3 percent from a year ago to 511,000 tonnes in September, unchanged from August.

  "Chinese refined copper output has remained at a high level this year partly due to the tightness of copper scrap, and partly due to expectations of downstream demand lifting in the fourth quarter on more infrastructure spending and further monetary easing by Beijing," said CIFCO Futures analyst Zhou Jie.

  "Also, now that a lot of smelters can export their output cheaply under the tolling tax cut, they are inclined to produce more."

  China's copper smelters are hoping to increase refined copper exports following a tax adjustment that has reduced their costs to export.

  Production of primary aluminium fell 4 percent from the previous month to 1.67 million tonnes in September, but was still comfortably above the average 1.4 million tonnes last year. Output increased 9.3 percent from a year earlier as new plants came on stream.

  Analysts said China's aluminium output is expected to stay at elevated levels as plants will likely increase their production as a rise in railway investment helps boost orders for alloy producers.

  However, chronic overcapacity is set to keep a lid on domestic prices and could limit imports, said Chen Dixi, an analyst at Jinrui Futures Co.

  Prices are currently hovering at around 15,400 yuan ($2,500) on the Shanghai Futures Exchange. ($1 = 6.2538 Chinese yuan)