Chinese copper apparent consumption rose 16.3% in August single month to 749,200 tonnes, 13.1% in September to 734,900 tonnes, and 47.2% in October to 768,200 tonnes according to the WBMS or a 9 mmt annualized rate apparently reflecting some restocking as we estimate normal demand is a 8 mmt rate. However, November volumes rose more, as though consumption were 900,000 to 1.1 mmt. All of these numbers greatly exceed the 2007-2010 reported full year Chinese copper demand levels reported at 4,863,400, 5,148,900, 7,085,800 and 7,418,600 tonnes, respectively, as YTD 2011 to October 6,370,300 tonnes according to WBMS. Chinese demand is rising near the 10% annualized rates that steel or aluminum outputs have been growing.

China reports fragments of data publicly, without integrating its five major categories of copper supply. The "fragments" suggest to us that November apparent demand rose towards 1 mmt. China imported 452,022 tonnes of refined copper and 430,000 tonnes of scrap that we estimate are 80% pure to net to 345,000 tonnes of fine copper in scrap in November. Including China’s normal mine output that we estimate at 105,000 tonnes, copper concentrate imports to smelters perhaps below normal at 150,000 tonnes and copper scrap-containing-junk or electronic refuse of at least 100,000 tonnes fine copper-equivalent, we estimate Chinese November copper apparent consumption at a big record of 1,102,022 tonnes or a 13 mmt annual rate at least 1/3 above normal.
 

These favorable demand data, combined with various supply losses such as nearly 100,000 tonnes of mine output lost at the FCX Grasberg strike, suggest upsides above the $4 copper price we estimate for 2012. FCX, Antofagasta, the Six Large diversified mines or smaller cap copper producers all should benefit.

 

This past week aluminum exchange inventories rose 238,813 to 5,312,186 tonnes or just 1,404 tonnes below the May 23, 2010 prior record. On Tuesday December 12^th LME aluminum inventories rose 95,890 and on Monday December 11^th they rose 115,950 tonnes, a total of 211,840 tonnes. Century Aluminum’s CEO theorized that weak European banks will force sales of aluminum warehouse financing deals.

Domtar authorized $400 mm more in stock repurchases above the $600 mm prior authorization on December 15^th. Packaging Corporation of America announced an additional $150 mm in share repurchases on December 14^th. It is notable that U.S. forest products companies have the confidence to buy back common stock, while metals commodities companies tied to world activity have less confidence.

Tomorrow December 20^th we expect the World Steel Assn. to report November world steel output and the International Aluminum Institute to report November world aluminum output. We expect both to be below October levels due to Chinese output cuts.

In this report we update about a dozen major tables and graphs that we keep, and provide a several page rundown of each of the major metals markets. It is a sort of "living" industry review.

Faithfully,
 

John C. Tumazos, CFA