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Better-than-expected copper import figures from China have given the red metal the support it needed to reach a near-two month high.
Chinese copper imports climbed for a third straight month, growing 8.1 percent to a 14-month high. Reuters reported that demand for the red metal as collateral for financing and arrival of previously placed shipment orders facilitated the increase.
Earlier this week, the Globe and Mail cautioned investors that they could be missing definitive signs of robust copper demand out of China amidst the persistent gloom and doom chatter of weak economic growth out of the Asian powerhouse. As expected, some traders were caught off guard by the strong figure, having expected fewer shipments on the basis of lax seasonal demand in China’s domestic market.
China’s July import and export figures are breeding the hope that the largest copper consumer’s economy could finally be breaking out of its two-year slowdown and headed towards much needed economic stability. Eugen Weinberg, an analyst with Commerzbank told Reuters that, “The data supports our positive view that the period of destocking in China is over and we forecast an improvement in metals demand and also a stabilisation of growth in China over the coming months.”
Despite the surge in copper prices, Natalie Rampono, an analyst with ANZ in Melbourne, remains cautions that the gains could be shortlived. “Markets are near record shorts in copper so after positive news in China’s trade data, we could see copper prices finally break out from the recent trading range, but I don’t think it will be sustained,” she said, adding “We’re in the seasonally slower months for demand, so we’re still expecting a bit of near-term weakness.” Rampono also hinted that markets could be gearing up early for the expected Q4 recovery of seasonal demand.
Company news
Chile’s state-owned copper heavyweight Codelco has placed a new issue with the international financial markets for $750 million of bonds. The bonds are for a 10-year period with an annual coupon of 4.50 percent and a 4.517 per year yield. The company is looking for outside financing to implement $27 billion investment plan for 2012-2016, according to MINING.com. The decision to go to international markets comes after the Chilean government reduced the amount of available funding for the coming year down to US$1 billion from the requested US$4.2 billion.
Meanwhile, credit rating firm, Standard and Poor’s bumped the Chilean firm up two notches to AA-, the highest rating for any South American company.
Mexico’s largest mining company, Grupo Mexico, made some decent gains alongside copper’s bump in price. Shares of the company were up 2.5 percent to 41.10 peso in midday trade according to Bloomberg.
Taseko Mines (TSX:TKO, NYSEMKT:TGB) reported reported its second-quarter results with $28 million of operating cash flow. The company posted revenues for Q2 of $68.2 million from the sale of 20.9 million pounds of copper and 238,000 pounds of molybdenum. Taseko produced 28.1 million pounds of copper from its Gibraltar mine last quarter.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned in this article.
