Shanghai Copper Rises on Improved Demand Outlook, China Imports

Copper futures in Shanghai extended gains from the previous day on signs of improved demand from China, the world’s biggest consumer of the industrial metal, and amid speculation about a recovery in the U.S. housing sector.

China imported 11 percent more of the metal and its products in December last year, the first year-on-year gain since October 2005. Housing starts in the U.S., where builders are the biggest copper users, unexpectedly rose in December, by 4.5 percent month-on-month, as sales improved and the weather turned unseasonably warm.

“The low prices have prompted some buying from both long investors betting on price rebounds and short investors who are closing out sell positions they hold,” said Wu Bowen, a trader at Shanghai Jinpeng Futures anghai) Co., today.

Copper for March delivery on the Shanghai Futures Exchange settled 0.1 percent up at 52,400 yuan ($6,737) a metric ton. The contract fell to a 9 1/2-month low of 50,920 yuan on Jan. 19.

Metal for immediate delivery in Changjiang, Shanghai’s biggest spot market, rose as much as 300 yuan, or 0.5 percent, to 55,780 yuan a ton today.

Copper for delivery in three months on the London Metal Exchange fell $20, or 0.4 percent, to trade at $5,600 a ton at 3:29 p.m. Shanghai time.

Stockpiles monitored by the London, New York and Shanghai exchanges rose 52 percent in the past four months. Prices have slumped 35 percent from all-time highs touched in May 2006,

Investors Divided

David Lilley, a partner at Red Kite Management Ltd., which has base-metals hedge funds worth more than $1 billion, said on Jan. 20 that copper has tumbled far enough and will rebound on rising industrial and housing demand in China and the U.S.

Others are not so optimistic. Raw materials still “have further to fall”, according to Simon Hayley, a senior economist at London-based Capital Economics Ltd.

Copper supplies from mines and scrap yards exceeded demand by 51,000 metric tons in October, compared with a deficit of 16,000 tons in September, as U.S. usage fell 14 percent, the International Copper Study Group said on Jan. 18.

Global copper production exceeded demand by 353,000 metric tons in the 11 months through November 2006 as consumption in China fell 2.8 percent, the World Bureau of Metal Statistics said Jan. 17.

Shanghai aluminum rose for a second day by 120 yuan, or 0.6 percent, to settle at 19,720 yuan.

A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Source: www.bloomberg.com