SINGAPORE: Copper prices rose in London and Shanghai on Wednesday after bullish comments from mining executives on the metal's outlook, but gains were checked by near-term worries about Chinese demand and geopolitical tension in the Middle East and North Africa.
Three-month copper on the London Metal Exchange rose $27 to $9,517 a tonne by 0338 GMT, while Shanghai's most-active copper futures contract, June , rose 660 yuan to 71,940 yuan a tonne.
Market worries over slower Chinese demand for base metals in the first quarter of the year persisted, following a slide in imports in February.
"Certainly in the first quarter of the year, they haven't been anywhere as aggressive as they have been in previous years," said Michael Overlander, chief executive of broker Sucden Financial, on China's copper imports.
China may be sitting on large amounts of unreported copper stocks -- estimated by Standard Chartered at 550,000 tonnes in bonded warehouses in Shanghai alone -- in addition to the 177,000 tonnes in Shanghai Futures Exchange warehouses and 434,000 tonnes in LME warehouses.
"China doesn't need copper right now -- they are stuffed. The arbitrage is shut and that won't change until those bonded stocks have come down," said a trader in Sydney. LME copper traded at a premium of 1,100 yuan to Shanghai, accounting for China's 17 percent VAT.
But the Japan earthquake may help bring the markets closer together after Japanese traders turned to Shanghai stocks for metal, driving up physical premiums to around $40 a tonne above the LME cash price, versus $10-$20 before the earthquake.
"What happened in Japan is insanely bullish for copper," said Ivanhoe Mines Ltd Chief Executive Robert Friedland at the Mines and Money conference in Hong Kong.
Friedland also saw "profound implications" for copper prices from long-term demand in China as the country builds a massive high-speed rail network and increases the use of electric cars.
Reconstruction after the Japan earthquake and tsunami could cost more than $300 billion and take years, with analysts estimating as much as 10 percent of the money to be spent on metals like copper and steel.
"They will need a lot of metal -- steel, aluminium copper, lead and zinc to replace the powerstations, buildings, cars and factories they have lost," said a trader in Hong Kong.
"It's bullish for copper yes, but I wouldn't go as far as 'insanely bullish'. The bigger story will remain China and that's the market investors really need to watch."
In the shorter term, investors are jittery about the risks posed by high energy prices stemming from the civil war in Libya and protests in the Middle East, most recently Syria and Yemen.
At least two explosions were heard in the Libyan capital Tripoli before dawn on Wednesday, Reuters witnesses said. No anti-aircraft fire could be heard in the city, while in Syria at least six people died in an attack on a mosque in the southern city of Deraa, site of unprecedented protests challenging President Bashar al-Assad's Baathist rule, residents said.
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