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BASE METALS: Strong Chinese Imports Propel Copper To Record
Feb 15,2011 09:41CST
industry news
Source:SMM

Feb. 14 (Bloomberg) --Copper futures settled above $4.60 a pound for the first time as strong Chinese demand reinforced forecasts of a global supply shortage of the industrial metal.

The most-actively traded contract, for March delivery, rose 9.25 cents, or 2%, to settle at $4.6285 a pound on the Comex division of the New York Mercantile Exchange, beating its previous record settlement of $4.5795 on Feb. 4.

The metal--used across the globe to make wires, pipes and sheets for buildings, automobiles, electronics and appliances--has gained 4% this year as investors have regained confidence in economic-growth-sensitive assets. Expectations of strong demand from major metals consumer China, as well as recovering developed nations, and a shortage of supply have prompted analysts to forecast a deficit of between 90,000 and 825,000 tons this year.

"A recovery here in the United States could be just getting under way," said Michael Gross, broker and futures analyst with OptionSellers.com. "Emerging markets never really slowed."

That view was bolstered Monday by stronger-than-expected import data from China, which, as the world's largest copper consumer, accounts for more than 40% of global annual consumption.

There, copper imports touched a four-month high in January, narrowing the rapidly industrializing nation's trade surplus and renewing confidence in the metal's near-term price prospects. Data also showed China officially overtook Japan to become the world's second-largest economy.

"Given the growth in underlying demand...China's monthly imports will have to rise further over the next few months," Barclays Capital analyst Gayle Berry said in a note to clients.

Preliminary data provided by the General Administration of Customs showed China imported 364,240 tons of copper, copper alloy and semifinished products in January, an increase of 5.7% from December and a rise of 25% from the same month a year earlier.

The data also boosted copper prices in Europe and Asia, with the benchmark London Metal Exchange copper contract hitting a record high of $10,170 a metric ton. Shanghai Futures Exchange copper rose 0.1%.

But traders and analysts warned against pinning too much importance on the trade figures, which reflect the rush to import copper into China before the Chinese exchanges closed for the Lunar New Year holiday, which ended last week.

"Although the data is impressive, it is a one-off," said VTB Capital analyst Andrey Kryuchenkov. "We'll have to wait until the data for March and April come out to see if restocking after the holidays has really hit off."

A sustained move higher in copper prices will depend on a drawdown in exchange stockpiles, which are currently rising, Kryuchenkov said.

Copper inventories in LME-listed warehouses rose 5,050 metric tons to 401,775 tons Tuesday, up 15% since Dec. 10. The most recent Comex inventory data, released late Friday afternoon, showed a gain of 418 short tons to 76,709 short tons.

The Chinese import data confounded expectations for much lower imports given anecdotal evidence that physical demand was weakening and that the arbitrage--or difference between LME and Shanghai prices--didn't encourage trade.

"While the market has taken the import figure as a bullish sign, we remain cautious as the data are backwards-looking and essentially reflect the market conditions and expectations during the preceding couple of months, rather than the current picture," said Standard Bank's Leon Westgate, cautioning that the metal may be due for a correction.

Copper settlements (ranges include electronic and pit trading):

Mar $4.6285; up 9.25 cents; Range $4.5435-$4.6345
May $4.6375; up 9.05 cents; Range $4.5540-$4.6430

 


 

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