WSJ:BASE METALS: Shanghai Copper Gives Up Gains After Import Data
SHANGHAI (Dow Jones)--Base metals on the Shanghai Futures Exchange settled little changed Friday, with copper giving up most of its early gains after data showed May copper imports were weaker than expected.
Investors were also troubled by fears the Chinese central bank may hike interest rates over the weekend after neighbor South Korea unexpectedly raised rates earlier Friday. Further tightening by the People's Bank of China would crimp economic growth and hurt markets, including metals.
Benchmark SHFE August copper settled almost flat at CNY67,700 a metric ton.
Copper rose to an intraday high of CNY68,090/ton in the morning session in response to mild gains on the London Metal Exchange as equities markets climbed overnight, but lost most of the ground in afternoon trade after the weaker-than-expected import numbers.
"The import data caught investors off-guard because many had expected a mild recovery for May, because price spreads [between London and Shanghai] have been narrowing in the past few weeks," said Minmetals Futures analyst Zhuo Guiqiu.
China imported 254,738 metric tons of copper, copper alloy and semifinished products in May, a decline of 36% from a year ago and a drop of 3% from April, preliminary data provided by the General Administration of Customs showed Friday.
In the January-May period, imports declined 25% to 1.42 million tons, customs said.
Narrower London-to-Shanghai premiums have seen copper stored at bonded warehouses being brought into the domestic market by buyers who use dollar-denominated purchases as a means to obtain funds at a time of credit tightening in China, traders said.
Three-month LME copper Friday traded at a premium of around $126/ton to August SHFE copper, hefty compared with a premium of around $90/ton in early May, but greatly narrower than $419/ton in late March.
"Because we have a large amount of bonded copper available, it consequently reduced the demand for imports as it's a lot easier to just clear the customs and get the metal, than ship the metal from other countries," Zhuo said. "It's not just easy for those who use copper deals as a financing tool, but also for real copper users."
Goods at bonded warehouses are dollar-denominated and are exempt from a 17% value-added tax. Around 100,000 to 200,000 tons of copper has entered the physical market in the last few weeks as the price spread narrowed, taking total bonded copper inventories to 400,000-500,000 tons, or around 7% of China's total copper consumption.
Still, industry participants expected imports to recover a bit in June as there is a lag between orders placed in April and May and arrivals of shipments at Chinese ports.
Copper traded at the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, was quoted at CNY69,150/ton-CNY69,200/ton, up slightly from CNY68,950/ton-CNY69,050/ton Thursday.
It was quoted $31 lower at $9,024/ton around 0700 GMT, when the SHFE closed.
SHFE zinc settled marginally higher and aluminum a tad lower, while lead was almost flat.
Friday's settlement prices in yuan a ton and LME late kerb prices from Wednesday in dollars a ton:
SHFE LME
Copper Aug 67,700 Up 30 3Mo 9,055 Up 25
Aluminum Aug 17,140 Dn 55 3Mo 2,660 Dn 8
Zinc Aug 17,530 Up 95 3Mo 2,285 Dn 7
Lead Sep 17,080 Up 20 3Mo 2,608 Up 31
-Yue Li contributed to this article; Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com
