Copper Gains for Second Day as Chinese Premium Spurs Buying -Shanghai Metals Market

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Copper Gains for Second Day as Chinese Premium Spurs Buying

Industry News 03:04:28PM Jan 12, 2010 Source:SMM

Jan. 12 (Bloomberg) -- Copper rose for a second day as investors in China stepped up arbitrage trading to take advantage of the price gap between London and Shanghai.

Futures in China are trading at a premium to their London Metal Exchange counterpart after climbing 12 percent in the past month, compared with a 9.8 percent gain in London. Prices in Shanghai yesterday were more than 1,000 yuan ($146) a metric ton higher than London, after accounting for China's 17 percent value-added tax, according to data compiled by Bloomberg.

"The arbitrage window has opened up again and this is reflected in the higher import numbers,"Yang Zhenqiang, an analyst at First Futures Brokerage Co., said from Tianjin. Arbitrage traders profit from disparities in prices of equivalent securities or commodities that are traded on more than one market.

Copper for delivery in three months on the London Metal Exchange gained as much as 0.4 percent to $7,595 a ton and traded at $7,570 at 9:22 a.m. in Singapore, extending yesterday's 1.4 percent climb.

March-delivery copper on the Comex division of the New York Mercantile Exchange was little changed at $3.44 a pound, while the April-delivery contract on the Shanghai Futures Exchange slid as much as 1.5 percent to 61,210 yuan a ton.

China's imports of copper and copper products rose to 369,368 tons in December, up 27 percent from November and 29 percent from a year earlier, according to Bloomberg data. Prices of the metal more than doubled last year as spending by governments, including China's $586 billion stimulus package, spurred manufacturing and boosted raw material demand.

Copper Premiums

Premiums paid by Chinese importers, typically a good indicator of demand, rose to around $100 a ton over the LME cash price last week, up from $60 to $70 last month, according to traders and analysts. In Singapore, premiums are now about $80 a ton compared with $40 to $60 last month.

"Copper's performance this year will largely depend on actual economic recovery, rather than the expectations of it,"said Yang.

The worst recession since World War II drove up stockpiles of the metal used in construction and automobiles. Inventories monitored by the London Metal Exchange gained 46 percent last year, while stockpiles in Shanghai expanded more than sixfold.

Among other LME-traded metals, aluminum fell 0.5 percent to $2,319 a ton, lead declined 0.6 percent to $2,515 a ton, and nickel added 1.2 percent to $18,100 a ton. Zinc fell 0.7 percent to $2,556 a ton, while tin rose 0.6 percent to $18,000 a ton by 9:35 a.m. in Singapore.
 

Copper Gains for Second Day as Chinese Premium Spurs Buying

Industry News 03:04:28PM Jan 12, 2010 Source:SMM

Jan. 12 (Bloomberg) -- Copper rose for a second day as investors in China stepped up arbitrage trading to take advantage of the price gap between London and Shanghai.

Futures in China are trading at a premium to their London Metal Exchange counterpart after climbing 12 percent in the past month, compared with a 9.8 percent gain in London. Prices in Shanghai yesterday were more than 1,000 yuan ($146) a metric ton higher than London, after accounting for China's 17 percent value-added tax, according to data compiled by Bloomberg.

"The arbitrage window has opened up again and this is reflected in the higher import numbers,"Yang Zhenqiang, an analyst at First Futures Brokerage Co., said from Tianjin. Arbitrage traders profit from disparities in prices of equivalent securities or commodities that are traded on more than one market.

Copper for delivery in three months on the London Metal Exchange gained as much as 0.4 percent to $7,595 a ton and traded at $7,570 at 9:22 a.m. in Singapore, extending yesterday's 1.4 percent climb.

March-delivery copper on the Comex division of the New York Mercantile Exchange was little changed at $3.44 a pound, while the April-delivery contract on the Shanghai Futures Exchange slid as much as 1.5 percent to 61,210 yuan a ton.

China's imports of copper and copper products rose to 369,368 tons in December, up 27 percent from November and 29 percent from a year earlier, according to Bloomberg data. Prices of the metal more than doubled last year as spending by governments, including China's $586 billion stimulus package, spurred manufacturing and boosted raw material demand.

Copper Premiums

Premiums paid by Chinese importers, typically a good indicator of demand, rose to around $100 a ton over the LME cash price last week, up from $60 to $70 last month, according to traders and analysts. In Singapore, premiums are now about $80 a ton compared with $40 to $60 last month.

"Copper's performance this year will largely depend on actual economic recovery, rather than the expectations of it,"said Yang.

The worst recession since World War II drove up stockpiles of the metal used in construction and automobiles. Inventories monitored by the London Metal Exchange gained 46 percent last year, while stockpiles in Shanghai expanded more than sixfold.

Among other LME-traded metals, aluminum fell 0.5 percent to $2,319 a ton, lead declined 0.6 percent to $2,515 a ton, and nickel added 1.2 percent to $18,100 a ton. Zinc fell 0.7 percent to $2,556 a ton, while tin rose 0.6 percent to $18,000 a ton by 9:35 a.m. in Singapore.