SYDNEY, Jan 08, 2007 (XFN-ASIA via COMTEX) -- China's imports of...

SYDNEY, Jan 08, 2007 (XFN-ASIA via COMTEX) -- China's imports of copper are expected to increase in the current quarter, offsetting lower demand for the metal in the US, Goldman Sachs JBWere said.

In a report, the firm's commodity analysts noted that a more than 12 pct fall in copper prices since the start of the year reflected market perceptions about supply, with investors reacting to a build up stocks of the metal on the London Metal Exchange (LME).

LME copper for delivery in three months was at 5,540 usd a metric ton in Asian trade after being traded in London last Friday at 5,661usd, while Shanghai copper futures fell their four pct daily limit on the LME Friday, for a third straight session.

Goldman Sachs said despite the market pushing prices lower over supply concerns, the picture is not quite as straightforward as headline stock numbers suggest, since nearly all of the build up in stocks has been in the US.

They believe China's net imports will continue to advance over the coming months because of a widening differential between the Shanghai Futures Exchange and LME copper prices, prompting Chinese buyers back into the market.

Chinese wire and pipe manufacturers have recently been holding off purchases of imported copper until prices move lower.

The Goldman Sachs analysts noted that from the end end of 2005 to January 4 this year global copper exchange stocks rose by 97,152 metric tons to 253,404 tons as US stocks rose 104,740 tons to 117,723 tons, offsetting stocks falling in Asia by 34,963 tons to 107,231 tons.

They said the market is noticeably stronger in Asia, and particularly China, and this is reflected in the premiums being paid there.

They said the world's largest copper miner, Chile's Codelco, recently won a 130 usd a ton premium for copper sold under contract to Chinese customers, a 125 usd a ton premium from European customers and an 85-90 usd a ton premium in the US.

Codelco has sold about 80 pct of its planned 2007 refined output of about 1.8 mln tons on contract, and plans to sell the remaining 20 pct on the spot market.

According to Codelco, its biggest single market in 2007 will be China, which has bought 225,000 tons of copper on contract, while its biggest single customer is the French cable producer Nexans, which has purchased 200,000 tons for 2007 delivery.

The Goldman Sachs analysts said China's latest trade data for November also points to strong demand continuing from China.

"It's worth noting that net imports have picked up over the past four months and, at 62,100 tons, net imports in November were at their highest level since September 2005," the Goldman Sachs analysts said.

They said the increase in net imports has also fed through to China's apparent copper consumption which at 313,000 tons in November was at its highest monthly level since September 2005.

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