Dr. copper (relationship between china and copper)

1.     Letter of Credit

-       http://terms.naver.com/entry.nhn?docId=728417&cid=518&categoryId=518

-       http://blog.naver.com/tpqhd123?Redirect=Log&logNo=20198661832

2.     Dr. Copper and China

-       Copper is used extensively in construction and electrical applications, is more dramatic.

-       The fears emanate from China, which has driven demand for commodities for more than a decade, and accounts for about 40 per cent of global base metal demand

-       China accounts for 40 per cent of global copper consumption, but demand in the physical market has been weak this year.

3.     About Copper Financing

-       http://ftalphaville.ft.com/2013/08/12/1599272/the-great-chinese-collateral-trade-illustrated/

-       Point : getting access to CNY through cheap FX funding.

1)     Trader는 외국에서 구리를 가져올 때 Onshore의 거래 은행에서 LC를 받아 가져오게 된다. (이때 trade value의 10-20 퍼센트 정도를 은행에 담보로 잡아두면 발행 해 준다.)

2)     가져온 구리를 Onshore 에서 팔고 CNY로 High yield에 투자 (http://ftalphaville.ft.com/files/2013/07/Goldman-July-9-2.png)

Or

구리를 그대로 다시 Offshore 의 구리 공급자에게 넘기고 USD를 받아 이 USD를 CNY로 Onshore 은행에서 바꿔서 High Yield에 투자

(http://ftalphaville.ft.com/files/2013/08/Copper-warrant.jpg)

 Or

구리를 담보로 은행에서 USD차입 후 CNY로 변경 혹은 구리를 담보로 CNY 차입

3)     Trader 의 최종 상태 : CNY가 High yield에 투자 되어 있고 USD를 낮은 차입 금리로 차입한 상태 (LC로)

4.     그리고 지금(2014.03.12)

http://www.ft.com/intl/cms/s/0/fd88d012-a877-11e3-a946-00144feab7de.html?siteedition=intl#axzz2vhai6IM0

At face value Chinese import numbers appear to show that all is well. Copper cathode imports rose to 397,459 tonnes in January, the second-highest reading for that month. February figures were lower, but still up 27 per cent from last year’s levels.

But instead of heading to factories, much of the metal has been going into warehouses. Copper inventories at the Shanghai Futures Exchange have risen for eight consecutive weeks, to 207,320 tonnes last Friday. Meanwhile stocks in bonded warehouses in China had grown to 745,000 tonnes by the end of February, the consultancy CRU reported, close to the historical high of 825,000 tonnes in late 2012

2014년 1월 중국으로 수입된 copper의 양은 월별 수입 양 중 두 번째로 높은 수치를 기록했고 2월에 조금 줄긴 했지만 전년도 대비 27% 많은 양의 copper가 유입 되었다.

그러나 이렇게 유입된 대부분의 copper는 공장에서 사용된 것이 아니라 창고로 들어가게 되었다. 상하이 선물 거래소에 있는 Copper Inventory에 쌓이는 Copper는 지난 금요일까지 8주 연속 늘어나게 되었고 그 사이 중국의 bonded warehouse에 쌓인 Copper의 양은 2012년 말 후로 최고치인 852,000 톤에 근접한 745,000 톤이 되었다.

“Signals coming out of China have been weak for copper,” says Matthew Wonnacott, analyst at CRU. “A lot of people who bought material on long-term contracts are now keeping it in bonded warehouses when it arrives because prices are too low.”

Sluggish demand for physical metal and adequate supply of copper on the market have caused spot prices to fall below those on the Shanghai Futures Exchange. Last year spot copper traded at a premium to the exchange price.

metal에 대한 수요의 감소와 더불어 충분한 공급은 spot price를 떨어 뜨렸다.

The decoupling of Chinese copper imports from physical demand is a direct result of the attractiveness of the metal in financing deals. In the simplest type of scheme, a trader uses a copper purchase as collateral to take out a US dollar loan at a modest interest rate. The proceeds are then invested in a higher-yielding asset in China or lent on in the shadow banking sector for a favorable return. The renminbi’s appreciation against the dollar – taken as a given until last month – offered the opportunity for a further gain when the original dollar borrowing needed to be repaid

중국의 Copper에 대한 수요가 줄어 들면서 관련 금융 거래에도 직접적인 타격이 있다. Trader들은 차입 비용이 싼 US dollar를 조달 하면서 그 담보로 copper purchase를 이용 했었고 이렇게 조달된 달러를 이용하여 higher-yielding asset in China 혹은 shadow banking sector에 빌려주는 식의 거래를 통해 수익을 거뒀었다. 여기에 더해 계속되는 달러 대비 중국 통화 가치의 상승 (저번달 전까지..)은 처음 차입했던 original dollar가 상환될 때에 further gain의 찬스가 있었다.

In more complex deals, the interest-rate arbitrage transactions are rolled over.

Smelters, refiners and fabricators have also used working inventory as collateral to obtain financing, according to Andy Shaw, base metals analyst at Credit Suisse.

Up to a third of all copper imports into China may pass through financing deals, the bank reckons. If the deals suddenly unwind, a lot of copper could be released on to the market.

크레딧 스위스에 따르면 중국으로 들어오는 구리의 1/3 가량이 financing deals로 들어 갔다. 만약 이 거래가 한번에 unwind가 된다면 많은 양의 copper가 한번에 시장으로 방출 될 수 있다.

Analysts are keenly watching the local market for signs of increased demand for metal, which has been poor since the Chinese new year at the end of January. The period from March to June is traditionally the peak buying season for copper in China, as processors replenish stock.

“If demand fails to pick up from mid-March . . . there would be downside risks for the copper price.”

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