Copper Rebounds as Discount to Shanghai Encourages China Buying

June 8 (Bloomberg) -- Copper rebounded in Asia after a drop to an eight-month low increased its discount to Shanghai prices, encouraging purchases by Chinese traders.

Copper for three-month delivery on the London Metal Exchange rose as much as 1.2 percent to $6,175 a metric ton, and traded at $6,156 a ton at 10:43 a.m. in Singapore. September copper on the Shanghai Futures Exchange lost as much as 1.8 percent to 49,220 yuan ($7,206) a ton, before trading at 49,510 yuan.

Futures in London are trading at a discount to Chinese contracts after declining 13.7 percent in the past month, compared with an 11.8 percent drop in Shanghai. Arbitrage traders profit from buying the metal in London and selling it in Shanghai to take advantage of the price disparity.

“We see a little bit of buying whenever there’s a gap in the window, however small the gap is, but the fundamental picture isn’t strong enough to support higher prices,” Wen Jinghai, an analyst at Bohai Futures Co., said from Dalian. “As we enter the weak demand season and economic uncertainties in Europe persist, prices are likely to head lower.”

Copper in London slumped as much as 3.9 percent to $6,037.50 a ton yesterday, the lowest level since Oct. 6, on concern slowing economic growth will curb demand for the metal used in construction and automobiles. Group of 20 finance chiefs, meeting in South Korea, said the global rebound faces “significant challenges.”

Aluminum and nickel in London were little changed at $1,868 a ton and $18,191 a ton respectively. Zinc fell 0.2 percent to $1,625 a ton, lead dropped 0.3 percent to $1,550 a ton, while tin hadn’t traded by 10:16 a.m. in Singapore.