Singapore 09/09/2016 - Chinese copper imports could rise in September, ending five consecutive months of month-on-month declines, although the increase may only be temporary, market participants said.
Imports of unwrought copper and copper products fell 2.8 percent month-on-month to 350,000 tonnes in August - this was the fifth straight month of decline on a month-on-month basis for Chinese copper metal although the pace of the the drop was smaller than July's month-on-month fall of 14.3 percent.
September imports could rise compared to August due to an improved import arbitrage between the London Metal Exchange and Shanghai Futures Exchange, sources said. This prompted an inflow of material to the domestic market from bonded warehouses during late-August and so far in September, they noted.
Sizeable shipments from Chinese smelters to LME-bonded warehouses had tightened the domestic market, lifting premiums to a four-week high of $45-55 per tonne on a cost, insurance and freight (CIF) basis to Shanghai from $35-50.
The SHFE copper price has also outperformed LME copper prices since late-August due to a weaker Chinese yuan, sources said.
Shanghai bonded copper stocks hit a four-month low at the end of August, falling 20,000 tonnes month-on-month to 560,000-590,000 tonnes - metal was either diverted to the domestic market or shipped to LME-listed warehouses in Asia.
But any increase in Chinese copper imports may not extend beyond September, market watchers said.
"Traders are unlikely to continue delivery as the margin is very small," a Shanghai-based copper analyst said, noting that the Shanghai price had closed at parity to the LME (plus logistical premiums) on Friday.
The import arb window is likely to close quickly because the increase in imports is likely to drive premiums down again, a Shanghai-based metals analyst added.
"There is also no need for China to import copper because supply is expected to continue exceeding demand given that smelter production remains high," she said.
Chinese copper imports in January-August were up 17.4 percent year-on-year at 3.45 million tonnes in January-August, mainly due to strong imports in the first quarter owing to earlier arbitrage opportunities between Shanghai and London. The import arb window has mostly been closed since late in January.
(Additional reporting by FastMarkets physicals team, editing by Mark Shaw)