Shanghai Copper Rises on Lower Stockpiles, Codelco Supply Riskadmin
Copper futures in Shanghai rose for a second day, extending yesterday’s advance from a nine-month low, as falling global stocks and possible supply disruptions at Codelco, the world’s biggest producer, supported the market.
Stocks monitored by the London Metal Exchange fell 1.2 percent to 193,475 metric tons yesterday, the first drop in more than two weeks, with most decreases in South Korean warehouses, the most probable destination for Chinese shipments. Codelco said yesterday there was a risk of a rockslide in Chile at its largest mine, where a cave-in last year cut production.
“Low prices have spurred buying from some investors who deem the price falls may have been overdone,” said Wang Xiaodan, an analyst at Minmetal StarFutures Co., today.
Copper for delivery in March on the Shanghai Futures Exchange rose 1,210 yuan, or 2.3 percent, to settle at 54,250 yuan ($6,947) a metric ton. The contract fell to the lowest in nine months Jan. 8.
Metal for immediate delivery in Changjiang, Shanghai’s biggest spot market, rose as much as 940 yuan, or 1.7 percent, to 55,960 yuan.
Copper for delivery in three months on the London Metal Exchange rose $100, or 1.8 percent, to trade at $5,725 a ton at 3:12 p.m. Shanghai time, after falling 11 percent last week.
Copper users in China, the world’s largest consumer of the metal, may rebuild stockpiles as prices of the commodity have dropped over 30 percent from their peak in May 2006, according to a Bloomberg survey yesterday of seven analysts, traders and processors.
Chinese buyers may return to the market after Chinese New Year, which falls on Feb. 18, to meet an expected seasonal rebound in demand that starts in March, said Chris Ding, a metals analyst at China International Capital Corp., in Beijing.
Chinese demand may slow this year, leading to an oversupply of the metal, according to Tsuguo Kato, a manager at Tokyo-based trading house Mitsui & Co.
“The three-month copper futures contract on the London Metal Exchange is likely to trade between $5,000 and $7,500 a ton this year,” said Kato, who oversees his company’s LME trading.
Shanghai aluminum rose, also for a second day, 310 yuan, or 1.6 percent, to settle at 19,960 yuan and traded at 19,960 yuan.
A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.