Ambrian Opens Shanghai Office to Expand Metals Trade (Update1)

Sept. 1 (Bloomberg) -- Ambrian Capital Plc., a London-based investment bank, opened a metals trading office in Shanghai to expand its business in China, the world's largest consumer of copper and aluminum.

Ambrian Metals Ltd., the bank's division trading physical industrial metals, broadened its portfolio to include lead, zinc and nickel this year to satisfy Chinese demand, said Malcolm Freeman, managing director of Ambrian Metals Ltd. in an interview in London yesterday. The company has also added biofuels and energy trading, Freeman said.

"The office is now running fully and we can participate in the Chinese domestic market for physical metals," said Freeman, who is also the managing director of the company's London Metal Exchange broker-dealer division Ambrian Commodities Ltd.

The Shanghai-based division, which was incorporated in June, will expand Ambrian's presence in China where the company currently accounts for about 5 percent of China's inbound copper shipments, Freeman said.

Copper prices on the London Metal Exchange more than doubled last year, aided by Chinese imports rising to a record in the first six months. Ambrian has a five-strong team of traders and trade support staff in Shanghai, while the administration is handled from London, Freeman said.

Even if Chinese demand for metals grows in the long-term, the short-term outlook is unclear and copper prices may ease heading into the fourth quarter, he said.

'Hand-to-Mouth'

Prices for three-month-delivery copper have risen 26 percent since this year's low on June 7, to a four-month high of $7,585 a metric ton today. Inventories tracked by the LME have fallen 28 percent to 398,775 tons today since this year's high in February.

Copper for immediate delivery could average $7,000 a ton in the third quarter and $7,100 in the fourth quarter, according to the median in a Bloomberg Survey of 13 analysts. A report yesterday showed business activity in the U.S., copper's second largest user, expanded at the slowest rate this year in August.

"The U.S. economy isn't out of the woods yet," said Freeman. A tightening of monetary policy in China and an unclear outlook in Europe were also likely to weigh on prices, he said. In addition, a lack of forward hedging activity from consumers, who were avoiding the accumulation of large inventories and instead buying "hand-to-mouth," made it difficult to "see forward demand consistently supporting this price," Freeman said.

"I can see the other metals holding fairly steady at these numbers, but I just have to keep a big question mark over copper," he said, adding that zinc, lead and aluminum traded closer to their cost of production.

Zinc is the worst performing metal this year among the six main metals traded on the LME, followed by lead and aluminum. Freeman joined the company in February 2006.