Copper imports into China, the largest user, may decline this month compared with a year ago, falling for a third month, as the metal is more costly overseas than locally, credit has tightened and domestic output has risen. “Imported copper is just too expensive,” said Beijing Capital Futures Co. analyst Xiao Jing, predicting a drop this month without giving a precise figure. Imports totaled 309,772 metric tons last April and 192,161 tons last month. China, which represents about 40 percent of global consumption, produced a record amount of the metal last month. While London futures reached an all-time high in February amid forecasts for a wider global deficit, prices dropped in March. Copper stockpiles in China have risen this year, as have those in London Metal Exchange locations closest to China. “The outlook for imports in April is bleak,” said Xiao, citing “tighter credit conditions, stricter financing rules, higher domestic output, large stockpiles and a persistent, negative arbitrage.” Three-month futures on the London Metal Exchange, which reached an all-time high of $10,190 per ton on Feb. 15, dropped 4.6 percent in March, and are little changed this month, trading at $9,398.75 at 6:31 p.m. in Singapore. The metal in London has traded at a premium to futures in China since July, making imports unprofitable for traders who seek to exploit price gaps. China imported 595,963 tons of refined copper in the first quarter, 21 percent less than the same period a year ago, according to customs agency figures. The metal is used in pipes and wires, including in appliances and power grids. ‘Fall Off’ Orders from users in China “just fall off” when London copper is at $10,000, according to Liu Xinyu, a manager at the trading unit of Golden Dragon Precise Copper Tube Group Inc., the biggest maker. In China, “no fabricator wants to stockpile at these prices,” Liu said earlier this month. Premiums paid by importers over the LME cash price have been little changed over the past month at $30 to $50 per ton on a cost, insurance and freight basis, according to Minmetals Starfutures Co., a unit of China’s largest metals trader. “The premium is telling us that demand is lackluster, however, this is due mainly to the unfavorable arbitrage and a drop in copper-financing activities,” said Zhao Kai, an analyst at the futures unit of Jiangxi Copper Co., China’s biggest producer. Zhao also forecast a decline in the volume of April shipments compared with a year earlier. China’s government has raised lenders’ reserve requirements 10 times since the start of 2010 and boosted interest rates four times since October to rein in inflation. Borrowing costs may increase again early next month, Dong Tao, an analyst at Credit Suisse Group AG, wrote in a report today. Record Production Copper output in China may climb 9.4 percent to a record this year as capacity expands and demand grows, according to the China Nonferrous Metals Industry Association. Refined-copper production reached an all-time high of 470,600 tons in March. Stockpiles in warehouses across China have risen. The metal tracked by the Shanghai Futures Exchange totaled 139,076 tons last week, 5.4 percent higher than at the end of last year, according to bourse data. Holdings in bonded warehouses -- which store metal before duties are paid and aren’t disclosed -- were estimated at 550,000 tons in mid-April from 400,000 at the end of 2010, Macquarie Group Ltd. has said. More than half of that is tied up as financing, Macquarie said in an April 18 report. When Shanghai prices are at a discount to those in London, importers can avoid losses by re-exporting material to LME warehouses. Such a practice drove China’s refined-copper exports to a record in March. LME Holdings Stockpiles in LME warehouses in South Korea, Singapore and Malaysia, the locations nearest to China, were 176,975 tons today, the highest level since at least 1998. Total LME inventories have risen 23 percent this year to 463,650 tons. China’s State Administration of Foreign Trade said on March 30 that the foreign-exchange income from the re-export of metal by Chinese companies shall be deposited into an account, which will be held until the final payment for the imports is made. “The new foreign-exchange rules may see some of this metal made available to the market,” said China International Futures Co. analyst Fang Junfeng. To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net

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