Positive Q1 reports may spur copper share gains
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Copper shares may extend gains in the next two weeks as publicly-listed copper producers released their first quarterly reports on expectations of increased profits amid a copper price rally.
Yunnan Copper Co Ltd, the nation's third largest copper producer, forecast a 160 million yuan profit in the first quarter of 2010 in a filing to the Shenzhen Stock Exchange last Thursday, a sharp contrast to the 260 million yuan loss the firm reported in the same period last year. Copper demand recovered in the fourth quarter of 2009 and Yunan Copper sold 36 percent of its annual production over the last three months of 2009.
As commodity prices rally, most loss-making miners have turned profitable. As of last Friday, six domestic listed nonferrous metals producers had released their Q1 reports. Four turned profitable from recording losses and two forecast profit growth.
Yunnan Copper is the first major copper producer to release its first quarter report. The nation's largest copper producer, Jiangxi Copper Co Ltd will release its first quarter report this Thursday.
The other three major listed copper producers, including Tongling Nonferrous Metal Group Co Ltd Anhui Jingcheng Copper Share Co Ltd and Gaoxin Zhangtong Co Ltd, will also file their Q1 reports next week.
Most publicly-listed copper producers are expected to register an increase in profits as copper price rally, said analysts. One firm that did not turn profitable at the end of 2009 was Gaoxin Zhangtong, which is expected to report a loss of 140 million for 2009.
The drought in Southwest China has not affected domestic copper production in the region, and copper prices may fluctuate and gain moderately amid mixed market signals, said a report by Rising Securities Co released last week.
Chinese copper demand will continue to increase in the second quarter, however, tightening liquidity may curb a price surge for the metal, said Wang Huachun, an analyst at Rising Securities.
In a quicker than expected recovery, copper on the London Metal Exchange (LME) hit a new high of $8,010 a ton during the second week of April.
While copper shares gain on profit-making reports, the industry may be reshuffled as central State-owned enterprises like China Minmetals Corporation and Aluminum Corporation of China (Chalco) aim to acquire copper assets in a bid to diversify their business portfolio.
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