Copper in Shanghai Tracks London Lower on Chinese Import Drop

By Glenys Sim

Feb. 12 (Bloomberg) -- Copper futures declined in Shanghai, following a drop in London prices, after China’s imports tumbled last month, raising concern that global stockpiles at a five-year high will further increase.

China, the world’s largest user, cut January imports of the metal and products by 19 percent from the previous month, when they reached a 20-month high, according to preliminary customs data yesterday. The ratio of domestic prices to the London Metal Exchange global benchmark averaged 8.0085 in January, from 7.8239 in December.

“The market has been taking direction from London these few weeks,” Li Junchao, an analyst at Shenyin Wanguo Futures Co., said from Shanghai. “The fall in imports was not surprising given the price difference between the two exchanges widened.”

Copper for May delivery on the Shanghai Futures Exchange, the most-active contract, fell as much as 1.3 percent to 27,600 yuan ($4,039) a metric ton, and stood at 27,810 yuan at the 11:30 a.m. local time break.

London Metal Exchange copper lost as much as 1.9 percent to $3,395 a ton, extending yesterday’s 0.8 percent decline, before trading at $3,415 a ton. The metal has fallen 4.8 percent since Feb. 9. March-delivery copper on the Comex division of the New York Mercantile Exchange slid 0.1 percent to $1.5385 a pound.

“We caution about reading too much into the trade data in January, as the Spring Festival fell in the month, cutting at least five working days and distorting month-on-month and year- on-year comparisons,” Na Liu, an analyst at Scotia Capital Inc., wrote in a report e-mailed today. Chinese markets were closed in the last week of January for the Lunar New Year holidays.

Copper Oversupply

Copper supplies probably exceed demand by 250,000 tons a month, equal to 3 million tons a year, adding to last year’s surplus estimated at 2.5 million to 3 million tons, according to David Threlkeld, president of Scottsdale, Arizona-based metals trading and research company Resolved Inc.

Inventory tallied by the London Metal Exchange stood at 516,450 tons yesterday, the highest since October 2003.

Still, the surplus won’t become “incredibly big” as producers cut output and China buys metal to rebuild inventories, said Adam Rowley, an analyst at Macquarie Group Ltd. in London.

The Chinese government agency that stockpiles commodities for the state bought 100,000 tons of refined copper from Chile and parts of Europe for inventories, Macquarie said yesterday in a report. Purchases of the metal may total between 200,000 and 300,000 tons in the first half, it said.

Among other LME-traded metals, aluminum rose 0.4 percent to $1,407 a ton, and nickel added 0.9 percent to $10,500 a ton. Zinc fell 0.7 percent to $1,163 a ton, and lead fell 1 percent to $1,158 a ton as of 12:59 p.m. in Singapore.

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