Copper in Shanghai Rises by Daily Limit as Stockpiles Dwindle...

Copper in Shanghai Rises by Daily Limit as Stockpiles Dwindle


May 17 (Bloomberg) -- Copper futures in Shanghai rose by the daily limit of 5 percent after stockpiles monitored by the London Metal Exchange declined, fueling speculation that output disruption will keep a squeeze on supplies.

Stockpiles monitored by the LME yesterday fell 4.3 percent, their biggest decline since Oct. 6, leaving inventory at less than three days of global consumption. Global supply this year has been hampered by labor disputes and delays at mines in Chile, Mexico and Indonesia, helping to drive prices to record levels.

``Copper prices may rebound from yesterday's falls as from the fundamental point of view, we're still short of stocks,'' Yuan Fang, a metal trader at Shanghai Dongya Futures Co., said by phone today.

Copper for delivery in August, the most actively traded contract, rose as much as 3,950 yuan, or 5 percent, to 84,300 yuan ($10,534) a metric ton on the Shanghai Futures Exchange. The contract traded at 81,300 yuan when the morning trading session ended at 11:30 a.m. local time.

Today's daily allowable maximum limit is set at 5 percent, after prices moved by the 4 percent limit yesterday, when prices fell as much as 3,350 yuan a ton. The contract reached an intraday record of 85,550 yuan a ton on May 15.

Metal for cash delivery in Changjiang, the biggest spot market in Shanghai, rose as much as 1,040 yuan, or 1.3 percent, today to 80,650 yuan a ton. Chinese users have to pay a 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Global Demand

Shanghai prices have almost doubled this year as investment funds buy commodities in pursuit of greater returns than from stocks and bonds. Global demand led by China has surpassed supply curbed by strikes and other output disruptions.

Codelco, the world's biggest copper producer, said prices may extend record gains this year because of possible supply disruptions, low inventories and purchases by investment funds.

``There are good fundamentals for copper,'' Roberto Souper, Codelco's vice president of sales, said yesterday. ``There are low stockpiles. Expectations for commodities are good and that makes funds massively get into the market.''

Freeport-McMoRan Copper & Gold Inc., which owns the world's second-biggest copper mine, Grasberg, in Indonesia, said last month that a decline in ore grades at the mine cut output in the first quarter. Grupo Mexico SA, the world's seventh-largest producer, said yesterday its San Martin copper and zinc mine will reopen after a strike that has halted output since March 24.

Copper for delivery in three months was bid at $8,350 a ton and offered at $8,400 on the LME at 11:51 a.m. Shanghai time. It rose 1.7 percent yesterday to $8,325.

Metal for delivery in July fell as much as 4 cents, or 1 percent, to $3.802 a pound on the Comex division of the New York Mercantile Exchange in after-hours trade. It traded at $3.815 a pound at 11:52 a.m. Shanghai time.



Cheers markco2