China completed the largest copper restocking in its history in 2009. But according to UBS Securities analysts Tom Price, Julien Garran and Peter Hickson, it is not nearly enough.<\/p>\n
In a note that they appropriately title "Warning: China is Short Copper", the analysts suggested that most of the copper that China imported last year has already been converted into semi-manufactured products. By the end of the year, they estimate that China was working through pre-existing stockpiles as well. That is pretty remarkable considering that the country imported about 3.2 million tonnes of copper as the government implemented a massive fiscal stimulus program.<\/p>\n
"Basically, China is short of intermediate and refined copper products," the analysts wrote.<\/p>\n
"Even a modest demand growth scenario for 2010 will require a robust restocking event, almost regardless of the constraints on trade posed by China's tightening credit markets."<\/p>\n
They called for an "imminent lift" in China's copper import flows beyond current expectations. And as such, they are pretty bullish on copper. They expect a copper price above US$3.00 a pound over the next three years, before it declines back towards US$2.30 a pound in 2015.<\/p>\n
Their favourite copper equities include Canadian companies First Quantum Minerals Ltd<\/a>. and Quadra Mining Ltd<\/a>., as well as foreign companies PanAust Ltd., Jiangxi Copper Co. Ltd., Kazakhmys PLC, and Freeport-McMoRan Copper & Gold Inc.<\/p>\n