WSJ : Copper Down On Concerns China Will Limit Metal-Based Financing

Copper prices were on track for their biggest drop in seven weeks after a probe of metals warehousing at a Chinese port led to concerns that demand for the industrial metal will fall if China clamps down on copper-based financing.
Copper for July delivery, the most actively traded contract, recently traded down 5 cents, or 1.6%, at $3.0870 per pound. It was the biggest drop for copper since April 15. Earlier in the session, futures hit $3.0845 per pound, the lowest price since May 9.
Chinese authorities are investigating financing deals that use copper stocks as collateral at Qingdao Port, according to reports from Reuters and Metals Bulletin. The northeastern city halted some shipments of aluminum and copper last week, as authorities investigate allegations that some companies have been using the same stocks of copper and aluminum as collateral for obtaining loans from different banks.
Many Chinese companies have turned to the copper market to gain access to cheap cash, particularly as China's government has cracked down on what it sees as excessive lending. The companies typically borrow in a low-interest currency such as dollars, and invest the money into higher-yielding local instruments, pocketing the difference.
Some traders worry that a clampdown on lending practices would reduce the demand for the industrial metal from speculators. A serious crackdown could also force companies to sell the metal they had been using as collateral, flooding the market with excess metal. China accounts for roughly 40% of world copper demand.
"The news has been worrying investors, and driving the price of copper lower," said Bart Melek, head commodity strategist at TD Securities.
Copper prices have gained 4% from their March lows, as some investors bet that China's efforts to temper its economic slowdown would result in greater demand for the metal. Copper is widely used in manufacturing and construction, making it sensitive to economic data.
Prices for the metal fell more than 1% on Tuesday, however, after lackluster factory data from China showed demand from the world's second largest economy may not be as robust as previously believed.

(BFW) *ORANGE PREFERS IPO FOR EE, WILL WEIGH ALTERNATIVES: CFO

 BN 06/04 13:36 *ORANGE TO REEVALUATE OPTIONS FOR EE UNIT AFTER SUMMER: CFO
 BN 06/04 13:36 *ORANGE PREFERS IPO FOR EE, WILL WEIGH ALTERNATIVES: CFO
 BN 06/04 13:36 *ORANGE CFO GERVAIS PELLISSIER SPEAKS TO REPORTERS IN PARIS
*ORANGE PREFERS IPO FOR EE, WILL WEIGH ALTERNATIVES: CFO
2014-06-04 13:36:55.331 GMT

--BRIAN LYSAGHT

-0- Jun/04/2014 13:36 GMT

RTR - China preparing to cancel tariffs on rare earth exports


(Reuters) - China is preparing to scrap controversial tariffs and quotas on the export of rare earth materials after a World Trade Organization (WTO) panel branded them discriminatory earlier this year, a source with direct knowledge of the matter told Reuters.

China is responsible for more than 90 percent of global rare earth production, giving it a chokehold over the supply of 17 elements with a wide range of uses in high-tech sectors such as defence and renewable energy.

The move to comply with WTO rules would reflect a tactical adjustment for Beijing, but its long-term plan to improve pricing power and gain market share in lucrative downstream industries is expected to remain unchanged.

"The WTO decision does not change the strategy, just the means at China's disposal," said David Abraham, an independent resource analyst.

"The tools of the day are now taxes, exchanges and regulations to consolidate companies into a few champions."

After complaining that global market prices were too low to cover the huge environmental costs of production, Beijing imposed tough output quotas and export tariffs in 2010 as part of a wider crackdown on the sector. Exporters have paid a tax of 15-25 percent this year.

The measures saw prices jump threefold, but a WTO panel said in March that the tariffs violated trade rules by giving domestic consumers an unfair advantage over foreign competitors.

Despite appealing the decision, Beijing expects to have little choice but to accept the ruling and could cancel export restrictions on rare earth, as well as tungsten and molybdenum, by next year, an industry source with ties to the government said. He declined to be identified as he is not authorised to speak with media.

"They may be cancelled next year," the source said, adding that if the move goes smoothly, export quotas on other products could also be scrapped at a later stage.

Prices are likely to be supported by a change in resource taxes, with several pilot regions -- including Ganzhou in eastern China's Jiangxi province -- already preparing to shift.

"I don't think the outlook is good for their WTO appeal and they realise it," said Amsterdam-based consultant Ryan Castilloux, founding director of Adamas Intelligence.

"So I think they're looking at what they need to do in the long-term to take what was once an export tariff and turn it into a resource tax so the net result is positive."

The ministries involved, including the Ministry of Industry and Information Technology and the Ministry of Commerce, were not available to comment. The Association of China Rare Earth Industry also did not respond to requests for comment.


ALTERNATIVE TECHNOLOGIES

Michael Silver, chief executive of American Elements, which sources rare earth supplies from China, said the policy shift would be a "significant step in the right direction".

"China has every right to charge whatever the market will bear for rare earths," he said. "But they should not use them to advantage their own end-product producers or extort foreign companies into manufacturing in their nation."

He said China's curbs were counterproductive and encouraged overseas consumers to pursue alternative technologies.

"My argument to China is why would you want the brightest minds on the planet to devote their careers to researching ways not to use a material you have control over forever?" he said.

As well as export restrictions, China's campaign to "rectify" the sector also included a strict domestic output quota as well as efforts to smash an illegal supply chain in which small-scale village producers mined large amounts of rare earth that would then be smuggled out of the country.

To strengthen its control over the sector, the government also sought to consolidate production and processing in the hands of a small number of large and mostly state-owned firms.

It has also tried to improve its pricing power by establishing trading exchanges, while an official with the Shanghai Futures Exchange said at a conference last month that China was mulling the launch of rare earth futures trading

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: TIBX -13.4%, FCEL -12.7%, ASNA -4.6%, AEGN -2.7%, ABM -1.5%, LDOS -1.3%, MFRM -1.1%.

Select solar stocks trading lower after Commerce Dept declared new duties on solar product imports: JKS -6.6%, YGE -6.4%, TSL -6.3%, CSIQ -5.5%, JASO -3.9%, SOL -2.2%.

Select oil/gas related names showing early weakness: STO -2.1%, SDRL -1.3%, RDS.A -1% (reports of explosions and fire at Dutch Shell plant), BP -0.9%, TOT -0.7%.

Other news: EONC -4.9% (co and Inventergy announce approval of merger and related transactions; expected to be consummated on June), PLUG -3.9% (in sympathy with FCEL earnings), BNNY -3.4% (discloses resignation of its independent registered public accounting firm, PwC), P -3.1% (DoJ reviewing ASCAP (American Society of Composers, Authors and Publishers) and BMI Consent Decrees, according to reports), SYNM -2.8% (announces voluntary delisting), SUNE -2.4% (announces proposed offering of $500 million aggregate principal amount of convertible senior notes due 2020), ALSN -1.6% (announced secondary offering of 35 mln shares of common stock be selling stockholders; Allison to repurchase 5 mln shares subject to completion of the offering),PNX -1.1% (revised timetable for delayed SEC filings; sets August 6, 2014 as the filing date for Form 10-K), SAP -1% (on TIBX guidance), CLDX -0.9% (negative mention on Mad Money).

Analyst comments: COH -1.9% (downgraded to Neutral from Buy at Sterne Agee), SSL -1.6% (downgraded to Sell from Neutral at Goldman), SUSP -1.5% (downgraded to Hold from Buy at The Benchmark Company), BCS -1% (downgraded to Neutral from Overweight at HSBC Securities )
.