Copper Drops in Asia as China Imports Raise Oversupply Concern

By Glenys Sim

March 11 (Bloomberg) -- Copper fell in Asia after Chinese imports climbed to the highest since at least 2003, raising investor concerns of a supply glut in the world’s largest consumer of the metal.

China’s imports of copper and the metal’s products jumped 42 percent in February from the previous month to 329,311 metric tons, according to preliminary customs data today. The country’s investment spending surged as the nation poured money into roads, railways and power grids to counter a plunge in exports, which a separate report showed fell by a record in February.

“Looking at the outflow of inventory from LME warehouses, it looks like imports may stay high this month as well,” Li Junchao, an analyst at Western Mining Co.’s futures department, said from Shanghai today. “China’s demand is just about the only reason for higher prices and the worry now is whether all this metal can be used up, or whether we’ll face an oversupply situation like in 2007.”

London Metal Exchange copper for delivery in three months dropped as much as 2 percent to $3,645 a ton, and traded at $3,647 at 2:53 p.m. Singapore time.

Copper for June delivery on the Shanghai Futures Exchange fell 0.6 percent to close at 29,030 yuan ($4,244) a ton. The most active contract climbed as much as 1.4 percent to 29,620 yuan earlier.

Inventories in London Metal Exchange warehouses in South Korea, the closest location to China, have fallen for 13 straight days and are almost half their levels at the start of the year.

Copper also declined as the Shanghai price premium over the London market narrowed, said Li. The Shanghai premium dropped to about $540 a ton yesterday from about $700 on March 5. Chinese buyers can profit from purchasing cheaper material overseas and selling on the domestic market.

Among other LME-traded metals, zinc lost 2.3 percent to $1,236 a ton, lead fell 0.7 percent to $1,285 a ton, and nickel slid 1.1 percent to $9,825 a ton. Aluminum added 0.7 percent to $1,331 a ton, while tin hadn’t traded as of 2:38 p.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net