Copper Declines for a Second Day as Economic Woes Trim Demand

By Glenys Sim

Jan. 13 (Bloomberg) -- Copper dropped for a second day as the slumping global economy cut demand for raw materials, pushing inventories to a five-year high. Copper futures tumbled the exchange-imposed daily limit in Shanghai.

Stockpiles tallied by the London Metal Exchange climbed 1.6 percent to 369,500 metric tons of copper. China, the largest metal user, discarded a plan to purchase copper to support domestic smelters because producers were still profitable and local inventories weren't high.

``Just because the state isn't buying from domestic smelters, doesn't mean they're not going to make overseas purchases,'' Wang Zhouyi, an analyst at China International Futures (Shanghai) Co., said today.

Copper for April delivery on the Shanghai Futures Exchange, the most active contract, declined 1,410 yuan, or 5 percent, from the previous settlement to 26,790 yuan ($3,919) a ton.

LME copper fell 3.9 percent to $3,120 a ton at 4:39 p.m. in Singapore, extending yesterday's 4.6 percent decline.

``We saw some arbitrage trade, buying London and selling Shanghai, in the past few days but that has tapered off as the gap widened,'' said Wang. ``We'll only know the extent of the buying when the import numbers come in the next few months.''

China imported 2.6 million tons of copper and the metal's products last year, down 5 percent from 2007, the Beijing-based customs office said today, citing preliminary data.

Imports Climb

Copper and copper product imports by China rose 32 percent in December from the previous month, according to preliminary customs data. Purchases increased to 286,576 tons.

Among other LME-traded metals, aluminum fell 3 percent to $1,470 a ton, zinc lost 2.1 percent to $1,225, lead dropped 5.6 percent to $1,105, nickel slipped 4.9 percent to $10,200, and tin was 3.5 percent lower at $11,200 as of 4:38 p.m. in Singapore.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net