SHANGHAI Jul. 25 (CBI China)--Premiums of imported copper decreased rapidly to between RMB 0-30/mt since early July.  The SHFE/LME price ratio has been at low levels since mid-March due to weak domestic demand, leaving imports unprofitable.  In this context, domestic traders reduced purchases of imported copper, except for long-term  contracts, causing premiums of imported copper to steadily decline. 

    Market players believe imports of refined copper will likely increase due to low premiums for imported copper, as well as from possible increases in the SHFE/LME price ratio, caused by declines of high-priced LME copper price.  In the short-term, there is little possibility for the premium to drop further. 

    China's imports of refined copper from January to May were 605 kt, down 23%, or 175.1 kt YoY.  Meanwhile,  China's output of refined copper grew by 18% or 214.4 kt, offsetting any shortages caused by decreasing imports, leaving ample supply in domestic markets.  According to China Customs, China's imports of refined copper were 75.7 kt in June, down 29.6% YoY, the lowest level since December 2006. 

    CBI believes China's output of refined copper will likely fall in 3Q, given current high copper concentrate and scrap copper prices, as well as unit maintenance at selected copper smelters.  Domestic copper demand will not likely fall sharply, and the shortage of refined copper will require imports.  SHFE copper prices will fall at a slower rate than LME copper prices, causing imports to grow as the SHFE/LME price ratio increases.