December 21 (Bloomberg) -- Refined-copper imports by China, the world’s largest consumer, increased for the first time in three months as some traders bet the bull market will continue and others shipped in the metal for trade financing purposes.
November imports were 232,298 metric tons, according to the General Administration of Customs. That’s 37 percent higher than 169,897 tons in October, according to Bloomberg News calculations.
Chinese refined-copper imports fell to the lowest in a year in October as arbitrage trading became mostly unprofitable in late July, according to data compiled by Bloomberg News. Copper, used in pipes and wiring, has gained 26 percent this year in London on demand from China, reaching a record today.
"Traders who are bullish about the market took the risk to bet on an increase in the absolute value of copper, rather than just doing arbitrage trade,” Zhao Kai, an analyst at Jinrui Futures Co., said by phone from Shenzhen today. Arbitrage traders buy the metal in one market and sell it in another to profit from a price difference.
Buyers anticipated copper prices to gain during the shipping period, which takes about one to two months, so when the metal arrived in Shanghai, the local prices would be higher than when it was ordered in London, according to Zhao.
The customs department said on Dec. 10 imports of copper, copper alloy and products in November rebounded by 29 percent from a month earlier, surprising analysts who expected the figure to remain low, given higher London prices than Shanghai.
Production of refined copper in China jumped to a record of 443,000 tons last month, according to the National Bureau of Statistics.
Output gained 13 percent in January-November to 4.37 million tons. "There’s ample supply in the market,” Zhao said.
Stockpiles at the Shanghai Futures Exchange warehouses expanded to the highest level in six months last week, up 10 percent to 127,836 tons, according to the bourse. China’s nonferrous metals output may jump by 57 percent to 41 million tons by the end of 2015, compared with 26.05 million tons last year, the Ministry of Land and Resources said in a statement published today on its website.
China’s refined-copper imports probably climbed in the last two months of this year from the low in October, Deutsche Bank AG analyst Adam Sieminski said in a report today.
Copper for three-month delivery on the London Metal Exchange hit a record $9,307.75 a ton today after the trade data was released. Metal for March delivery on the Shanghai Futures Exchange closed 0.9 percent higher at 69,250 yuan ($10,396) a ton.
"The jump of imports in November may also be a result of trade financing,” Fan Junmei, an analyst at Shenzhen Rongtuo Trading Co., said by phone. "As banks tightened loans, this has become an option for firms looking to improve cash flow.”
Trading companies receive a letter of credit for imports as they buy metals, such as copper and zinc, from overseas. The firms then get a window of about 90 days of almost free credit, and only need to pay back the funds after they sell the products, according to Fan.
China’s central bank raised its benchmark lending and deposit rates in October, the first time since 2007. It also increased commercial lenders’ required reserve ratio three times since November to fight inflation. The consumer price index grew by 5.1 percent last month, the fastest pace in 28 months.
Still, the country, which overtook Japan as the world’s second-largest economy in the second and third quarters, lags behind Asian countries including Malaysia and South Korea in boosting borrowing costs.
"As the market consensus is that the PBOC will further tighten liquidity in coming months, imports for financing purposes may sustain,” Fan said. "So even if the arbitrage ratio is bad now, imports may not be very low.”