China copper imports fall 3pc on month in May

HONG KONG: China's imports of unwrought copper and semi-finished copper products dropped 3 percent in May after falling 13.7 percent in April because of high stocks.

The world's top copper consumer imported 254,738 tonnes of copper in the form of anode, refined and alloy, and semi-finished products such as rods versus 262,676 tonnes in April, data from the General Administration of Customs showed on Friday.

In the first five months, imports fell 25.3 percent on the year to 1.42 million tonnes.

The May imports were lower than expected by analysts and traders who had predicted arrivals to rise slightly from April given that the arbitrage between Chinese prices and import costs had narrowed.

"The May imports are lower than we expected. We expected imports in May to rise from April. The main reason for low imports should be that costs of imports for refined copper were still above Chinese prices in May and high stocks discouraged spot imports," Li Ye, analyst at Minmetals Futures in Shenzhen city said.

High bonded stocks in Shanghai covered extra demand, although the arbitrage had improved, analysts said.

"This is a little lower than my expectations. I had expected to see an improvement from April's number, and it s a bit disappointing. Bonded warehouse stocks appear to have displaced demand for spot imports," said Judy Zhu, commodity analyst at Standard Chartered Bank.

The arbitrage window between cash LME and Shanghai's nearest contract opened for some days in May, while Chinese spot prices have maintained premiums of about 300-500 yuan per tonne over the nearest contract, prompting investors and merchants to pay the VAT (value-added tax) and resell the metal to Shanghai, traders said.

Bonded stocks, which arrived in previous months and have not been assessed China's 17 percent VAT payment, were estimated by analysts and traders at between 350,000 and 500,000 tonnes last week, down from estimated 550,000-700,000 tonnes in early April 2011.

Merchants had booked spot copper in May and the metal is seen arriving in June and July, traders said.

Copyright Reuters, 2011