China sits on up to $1.5bn in copper profits

Discussion in 'Commodity Futures' started by ASusilovic, Oct 11, 2010.

  1. China is sitting on a profit of nearly $1.5bn from a bold trading strategy in copper based on expectations of an emerging markets-led boom.

    Beijing’s bet that a ‘super-cycle’ in metals markets would keep copper prices high, despite the financial crisis, has paid off, according to dealers’ calculations. The substantial paper profits come after China’s State Reserves Bureau, the official body in charge of the country’s strategic commodities reserves, mopped up copper surpluses last year when the crisis was at its worst and prices had tumbled.

    As demand for metals has recovered, copper markets have tightened dramatically and prices have soared.

    Metals traders estimate that the SRB bought between 250,000 and 300,000 tonnes of copper, equal to nearly 2 per cent of global annual production, in early 2009 at a price of less than $3,500 a tonne. The SRB does not disclose its purchases. As copper prices rose last week to a two-year high of $8,349 a tonne, traders and industry executives calculated Beijing’s paper profits to be about $1.2bn-$1.5bn.
  2. Let's see them turn that position into a realized profit. :eek: :D :(
  3. Perhaps only a proper hedge for its projected consumption!
  4. Wow...1.5 billion dollars for China! I takes them what...about 7 hours to collect that much in tax revenue. Hope they dont spend it all in one place.
  5. As they release that copper to their manufacturers the again use the free market to subsidize socialism.
  6. Guess the writing is in the wall..

    China Says Its Medium, Heavy Rare Earth Reserves May Last Only 15-20 Years
    By Bloomberg News - Oct 16, 2010 5:51 AM ET

    China’s medium and heavy rare earths reserves may last 15 years to 20 years at the current rate of production, possibly requiring imports, the Ministry of Commerce said today.

    Domestic rare earths deposits dropped to 27 million metric tons by the end of 2009, or just 30 percent of the world’s total known reserves, from 43 million tons, or 43 percent of the world total, in 1996, Chao Ning, section chief of foreign trade at the ministry said at a Beijing conference.

    China, controller of more than 90 percent of production of the materials used in cell phones and radar, cut its export quotas by 72 percent for the second half and reduced output, spurring a trade dispute with the U.S. The country may not be able to meet growing global demand as the government continues to curb output, Lynas Corp. said in March.

    “We cannot rule out the possibility that China may need to rely on imports sometime in the future for these minerals, instead of supplying the world,” Chao said.

    Japan, the world’s biggest importer of rare earths, will urge China to boost shipments of the minerals after a government survey showed that 31 Japanese buyers reported problems with exports, Trade Minister Akihiro Ohata said in Tokyo Oct. 5.

    U.S. Complaint

    The U.S. has asked business groups and labor unions to provide evidence that China is hoarding these elements for a case that might be filed at the World Trade Organization.

    Production and export quota cuts are to protect the environment and in line with WTO rules, Yao Jian, spokesman for China’s Ministry of Commerce, said yesterday.

    China reduced its quota for rare-earth exports to 7,976 tons for the half, compared with 22,283 tons for the first half and 28,417 tons for second half of last year, according to data from the ministry.

    “China cannot afford to continue to carry the burden of supplying the world, from a strategic, environment and economic point of view,” Chao said.

    Rare earths are a group of 17 chemically similar metallic elements, including lanthanum, cerium, neodymium and europium. The U.S. was self-sufficient in the materials until the mid- 1980s, when lower labor and regulatory costs helped China’s climb to dominance, the U.S. Geological Survey said in a report.

    “China is not the only country that has these deposits, but it has been carrying the lion’s share of the supply in more than a decade, at the cost of quickly depleting its own resources and hurting its environment,” Chao said.

    A rare-earth mine in the U.S., in Mountain Pass, California, shut down most operations in 2002. Molycorp Inc., which owns the mine, plans to reopen it this year, the company said in a June prospectus.