(Reuters) – Inventories at China’s bonded copper warehouses are all but empty as two dominant financiers of Chinese metals, JPMorgan Chase & Co and ICBC Standard Bank Plc, have halted new business there, Bloomberg News reported on Monday.
Traders from London to Lima closely watch the flows in and out of Shanghai’s huge bonded copper stockpile, Bloomberg said, the focal point for a multi-billion-dollar cash-for-copper trade, whereby Chinese companies would use metal as collateral for cheap financing.
Numerous traders and bankers interviewed by the news agency said they believe the trade is dead for now, it reported, with some predicting the bonded stocks – metal stored in free trade zones – could drop to zero, or close to it.
Bloomberg reported last month, citing people familiar with the matter, that JPMorgan and ICBC were cutting back on financing to China’s metals trade. At that time JPMorgan declined to comment, while ICBC did not respond to Reuters’ request for comment.
Inventories of copper in Chinese bonded warehouses continued to deplete and were last at a record low of 25,500 tonnes, exchange data showed.
This comes amid financing troubles at China’s once-top copper importer Maike Group, which is struggling to resume its business after major miners halted trade with the company when it was unable to pay its lenders.
The implications are being felt across the market, as the world’s largest copper consumer becomes more reliant on imports to meet its near-term needs at a time when global stocks are already at historically low levels, Bloomberg added in Monday’s report.
China’s copper imports jumped 25.6 per cent last month from a year earlier, with demand expected to benefit from more planned state spending on infrastructure, customs data showed.
Copper prices on the Shanghai Futures Exchange have declined more than 6 per cent so far this year and were trading around 63,850 yuan ($8,801.80) a tonne on Monday.
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