Copper Advances in Shanghai on Speculation China Demand to Grow

LONDON, July 15 -- Copper in Shanghai climbed for a second day to a two-week high on speculation China's demand for the metal may grow further as the country's economy improved.

    China's economy may have expanded 7.8 percent in the second quarter as record lending and surging investment drove a rebound from the weakest growth in almost a decade, a Bloomberg survey showed.

    "Investments are flowing into the copper market on expectation that the economy will bottom out in the second half, lifting demand for the raw materials," said Zhu Bin, head of research at Nanhua Futures Co., by phone from Hangzhou today.

    Copper for October delivery on the Shanghai Futures Exchange gained 2.3 percent to 40,600 yen ($5,942) a metric ton at 10:02 a.m. local time, extending yesterday's 2.1 percent gain. Three-month delivery copper on the London Metal Exchange gained for a third day, adding 0.5 percent to $5,068 a ton.

    "While many analysts think China may have gorged itself on the metal, leaving it with little appetite for imports in the second half, tightness in China and falling stocks suggest that more imports may still be on the cards," analysts at Investec Bank (Australia) Ltd. said today in a report.

    The country's imports of copper and its products climbed to a record 475,999 tons in June, while stockpiles dropped 5,813 tons to 54,167 tons.

    "Defying expectations for a drop-off in China's copper purchases, Chinese imports hit a fresh record in June, reflecting the impact of soaring lending on the economy," Jing Ulrich, chairwoman of China equities for JPMorgan & Chase Co., said in a report yesterday.

    Infrastructure Spending

    Fixed-asset investment for electricity and heating production and supply infrastructure increased by 20.5 percent from a year ago in the January-to-May period, Ulrich said. The power sector accounts for 48 percent of Chinese copper demand, she added.

    If Chinese copper imports don't decelerate markedly in the second half, the country will be absorbing all excess supply in the second half as well as the likely market surplus next year, at a time when fabricator demand in Western countries is subdued, she added.

    Among other LME-traded metals, aluminum was unchanged at $1,605 a ton, zinc gained 0.9 percent to $1,510 a ton and lead climbed 0.3 percent to $1,600 a ton. Nickel added 0.8 percent to $15,701 a ton and tin hadn't traded by 10:05 a.m. in Singapore.

    (Source: Bloomberg)