Copper imports by China are poised to rise further from a two-year low in April as a drop in global prices has triggered a record number of orders to remove the metal from warehouses across Asia.
The CHART OF THE DAY shows canceled warrants from London Metal Exchange warehouses in Malaysia, Singapore and South Korea soared to an all-time high as copper prices plunged to the lowest in almost three years. Orders to remove the metal from storage in Malaysia alone more than doubled in the past month, according to the LME, whose network covers more than 700 warehouses, handling about 80 percent of the global metals trade.
Imports by China, the world’s biggest copper user, are expected to pick up as demand for financing has increased after the imports became profitable, Barclays Plc said in a research report. This dynamic, in which traders can get loans using the metal as collateral, played a part in supporting the surge in LME warrant cancellations in Johor, Malaysia, according to the June 21 report.
“There were very good arbitrage opportunities in May and early June,” said Ren Gang, deputy general manager of the Shanghai unit of Qingdao Youbangyuan Trading Co., a privately owned copper importer. Traders can exploit price differentials by buying in London and selling in Shanghai.
Copper, used in pipes and wires, fell for the third straight quarter, the worst run since 2001. Economists from Goldman Sachs Group Inc. to China International Capital Corp. last week cut forecasts for China’s economy in 2013 after money-market rates surged to record highs, raising concerns that increased borrowing costs could further hurt growth.
Premiums, a gauge of Chinese demand, paid by importers over the LME cash price, are at the highest since 2009, according to Metal Bulletin data compiled by Bloomberg. Refined copper imports climbed 27 percent in May from a month earlier, data from the customs department showed.