Copper in London, New York May Drop as Gain Seen as Excessive

Copper in London may decline for the first time in three days as some investors deemed the biggest gain in two weeks as excessive amid a lack of signs that Chinese demand is picking up.

Three-month copper on the London Metal Exchange was little changed at $9,606 per metric ton at 3:37 p.m. in Singapore after earlier losing as much as 0.4 percent. The metal gained 2.3 percent yesterday, the most since March 23.

“Recent price gains have hinged on China’s demand picking up and that’s not happening yet,” Shi Wenzhu, an analyst at Huatai Great Wall Futures Co., said from Shanghai. “Inventories remain high and premiums aren’t picking up.”

Inventories in LME warehouses have risen 17 percent this year, climbing to a nine-month high of 442,325 tons on April 5. Copper stockpiles in Shanghai are up 23 percent this year.

Premiums paid by Chinese importers over the London Metal Exchange cash price have been quoted at $20 a ton on a cost, insurance and freight basis to Shanghai since February, according to data from industry publication Metal Bulletin. A rise in premiums would indicate a pickup in demand.

“We remain cautious on the base-metals group, particularly on copper, which remains elevated despite rising inventories, sluggish physical premiums, and persistent questions about hidden Chinese stocks,” Edward Meir, a senior analyst at MF Global, wrote in a monthly report yesterday.

Shanghai warehouses hold about 600,000 tons of refined metal, with a further 100,000 tons in southern ports, equivalent to about 11 percent of China’s total annual usage, Standard Bank Plc analyst Leon Westgate said in a March 28 report.

Japan’s Economy

Copper in London dropped to a three-month low of $8,944.50 a ton on March 15 on concern Japan’s record quake will hamper economic growth. The Bank of Japan today cut its assessment of the economy following the March 11 temblor and ensuing tsunami.

Copper on the Comex in New York declined as much as 0.5 percent to $4.35 per pound. The contract rose 2.5 percent yesterday, also the most since March 23. June-delivery metal on the Shanghai Futures Exchange gained as much as 0.7 percent to 71,950 yuan ($10,994) a ton and ended the day at 71,690 yuan.

Expectations that global copper supply will lag behind demand drove a 30 percent rally last year and pushed the price in London to a record $10,190 on Feb. 15. Rio Tinto Group, the third-largest mining company, expects copper demand in China and other emerging markets to grow faster than output, prompting a global deficit of as much as to 500,000 tons this year, Andrew Harding, head of the company’s copper business, said yesterday.

Lead in London shed 0.5 percent to $2,805 a ton, and zinc lost 0.3 percent to $2,443.75 a ton. Nickel rose 1.7 percent to $26,869 a ton, tin advanced 0.6 percent to $32,300 per ton, and aluminum gained 0.7 percent to $2,688 a ton.

(Source: http://www.bloomberg.com/news/2011-04-07/copper-in-london-new-york-drops-as-advance-seen-as-excessive.html)