China’s probe into metals warehousing at Qingdao port was unlikely to “break” the copper market, while it might depress prices in the short term, according to Bank of America Corporationsaid in a report.
While copper might be released into the market as banks’ tightening of lending caused some deals to unwind, the amounts in Qingdao were equivalent to less than a day of Chinese demand, the bank said.
“We believe the tonnages involved in financing deals, especially at Qingdao, are not big enough to break the copper market,” London-based analyst Michael Widmer wrote in the report dated yesterday. “Yet, liquidity available for financing deals may decline especially for speculative transactions.”
There was a “high probability” listing copper that didn’t exist for collateral purposes also happened at other ports, Widmer wrote. Still, the market knew about under-collateralisation of some financing deals “for months” and that had prevented copper from declining more sharply, he said.
Copper fell 2.6 percent in June amid concern that deals using copper as collateral may start unwinding.