London Metal Exchange warehouses in Southeast Asia, empty of copper for much of the year, will welcome more of the industrial metal in the next few weeks as smelter expansions ease a shortage that has helped prices to historic highs. High world copper prices have led customers in China to sell back cargoes booked earlier for import, traders said on Tuesday, a day after Singapore's LME warehouses received 750 tonnes - their first copper in more than two months.
Several thousand tonnes were on their way to Singapore or the nearby Malaysian state of Johor, they said, for storage in LME-approved warehouses.
"Singapore is expecting at least 2,000 to 3,000 tonnes in the next couple of weeks," a trader in the city-state said, adding the metal would be either Australian or Chilean in origin.
Global LME stocks slumped to 28,875 tonnes on Friday, their lowest in 31 years and less than the world consumes in two days.
Low stocks, plus a prolonged shortage of smelting capacity that has delayed the conversion of ore into metal, were major factors in pushing copper prices to an all-time high on June 20.
Copper traders have also been attracted to sell into LME warehouses by a high backwardation, the premium at which metal for immediate delivery is sold over delivery at a future date - currently around $200 a tonne on the three-month contract.
Spot copper prices in China are as much as 1,500 yuan lower than the cost of importing copper, including taxes and fees, although that gap has narrowed from over 2,000 yuan in late June, traders in China said.
"If they can't make money on the import, they are selling back a portion of their orders," said a trader who sells copper to Chinese buyers. "If I have no other customers, I can deliver it to a warehouse."
Exchange stocks could also be swollen by an influx of metal previously held in private warehouses, traders said, if holders of this material wish to take advantage of the backwardation.
"There's a lot of material that's not yet been flushed out. It should come out now that prices have started going down, and people would like to sell it and take profit," a senior official at a trading company in Singapore said.
Copper for delivery in three months on the LME traded at $3,255/$3,260 a tonne by 0655 GMT, about 5 percent below its record high.
But China, which consumes about a fifth of the world's copper, will still be the driving force behind demand, with consumption of the metal set to keep pace with economic growth in excess of 9 percent.
"All of this material can go again in a jiffy," said the first Singaporean trader, referring to metal being transferred into Southeast Asian warehouses.
Traders increasingly favour Malaysian warehouses, where fees are lower than in Singapore and the distance to factories in peninsular Malaysia is shorter, some traders have said.
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