Copper Jumps to 14-Month High in Shanghai as Spread Traders Buy

By Glenys Sim

Nov. 17 (Bloomberg) -- Copper surged to a 14-month high in Shanghai as investors in China, the world’s largest metals user, bought the metal to profit from a widening gap between domestic and international prices.

The contango, where the metal for near-term delivery is cheaper than supplies with later delivery dates, has grown in anticipation stockpiles will continue to build following record imports this year. Copper for February delivery, the most-active contract on the Shanghai Futures Exchange, has gained 4.6 percent in the past week.

“There’s some money to be made in trading the widening contango,” Li Jingyuan, an analyst at Haifu Futures Co., said today from Shanghai. “It’s not great because the margins are high for copper but with the market expected to remain volatile, traders do what they can.”

February-delivery copper in Shanghai gained as much as 2.1 percent to 53,840 yuan ($7,886) a metric ton, and ended the day up 0.9 percent at 53,200 yuan. Copper for March delivery gained 0.9 percent to 53,520 yuan a ton.

Copper for three-month delivery on the London Metal Exchange fell 0.4 percent to $6,798.50 a ton at 3:07 p.m. Singapore time. The contract yesterday jumped as much as 5.3 percent to $6,865 a ton, the highest price since Sept. 26, 2008, as the dollar weakened.

“There are many investors out there who are very optimistic about upcoming demand,” said Southwest Futures Co. analyst Jia Zheng. “They expect supplies to tighten and the inter-delivery spread to narrow towards the Lunar New Year.”

Shanghai copper inventories stood at a five-and-a-half-year high of 104,939 tons last week as imports surged, driven by stimulus spending, state stockpiling and a lack of scrap material. Stockpiles in duty-free warehouses may have risen to 350,000 tons from almost none at the start of the year, Xi’an Maike Metal International Group said earlier this month.

Among other LME-traded metals, aluminum was little changed at $2,032 a ton, zinc lost 1 percent to $2,257.25 a ton and lead declined 1.1 percent to $2,364 a ton. Nickel dropped 0.3 percent to $16,750 a ton, while tin slipped 1.6 percent to $14,750 a ton as of 4:21 p.m. in Singapore.

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