China, Copper's Crutch, to Keep Up Import Pace

By ELISABETH BEHRMANN China's copper imports fall off the cliff after April in most years, but 2009 could prove different, with sustained Chinese imports keeping prices firm. Continued healthy demand would be bullish for the global market, given China is currently the only buyer of size. A seasonal drop in Chinese imports amid a global slowdown could have had a more pronounced impact on prices than in previous years. In four of the past five years, Chinese copper imports fell sharply in May. The drops were as much as 26% to 59%, compared with April. Only in 2005 did imports rise, increasing 12.8% from April. China tends to buy most of its raw materials during the first few months of the calendar year, securing much of the needed supply during the winter months, ahead of the more active summer trade. But there are several factors at work this year that could mitigate seasonal weakness and produce another off-trend year. For one, London Metal Exchange copper -- up 33% since the start of the year due to Chinese government buying for its strategic stockpiles -- continues to trade at a discount of about 20% to copper prices on the Shanghai Futures Exchange, encouraging speculative imports to take advantage of the price gap. Partly because of strong Chinese imports, LME copper stocks have already fallen 25% since late February to 394,925 metric tons. The trend looks set to continue. Canceled warrants, which represent metal that is due to leave warehouses soon, now account for one-fifth of remaining LME stocks. This indicates ongoing demand that traders say originates solely from China. "I think imports are likely to remain strong in May. The favorable LME/SHFE price spread, a tight scrap market and [Chinese] restocking point to imports remaining strong at least till late second quarter," said Yingxi Yu, an analyst with Barclays Capital in Singapore. Physical traders in China say more shipments -- from orders placed in March when the LME/SHFE price difference was much wider -- are due to arrive at Chinese ports in mid or late May. Moreover, not all the buying is the result of stockpiling and speculative demand. China's four trillion yuan ($586 billion) stimulus package, announced late last year, is starting to stir demand, particularly among wire fabricators, according to one Shanghai-based analyst. Ma Xiaoxin, deputy manager of the copper department at China Minmetals Nonferrous Metals Co., said Friday that China's refined copper imports in 2009 are expected to rise 34% to 1.95 million metric tons. Write to Elisabeth Behrmann at Elisabeth.Behrmann@dowjones.com