Copper Goes Limit-Up In Shanghai For Second Day

Another positive indicator??

Copper in Shanghai Jumps Limit for Second Day on Liquidity

• By Richard Dobson
  
  April 13 (Bloomberg) -- Copper jumped by the limit in Shanghai for a second day as surging liquidity spurred concerns about inflation, boosting demand for the metal as a hedging investment.
  
  China’s new loans advanced more than sixfold from a year earlier to a record 1.89 trillion yuan ($277 billion) in March, the central bank said April 11. M2, the broadest measure of money supply, grew 25.5 percent, the bank added. That’s the fastest since Bloomberg began compiling data in 1998.
  
  “Part of those enormous new loans might wind up in the commodities market, especially the base metals sector, which is traditionally a preferred exposure in anticipation of inflation,” Wu Jiaxi, analyst at Jinshi Futures Co., said by phone from Shanghai today.
  
  The most actively traded July-delivery contract gained as much as 7 percent, the maximum allowed, to 40,620 yuan ($5,945) a ton and closed 5.4 percent higher versus the previous settlement price at 40,000 yuan. The contract rose the previous daily limit of 5 percent on April 10.
  
  As a result of the lending boom, China’s banks, which are mostly state-owned, have already met the bulk of the government’s target of at least 5 trillion yuan of new loans this year. Lending may top that level by as much as 3 trillion yuan, according to JPMorgan Chase & Co.
  
  Scrap supply
  
  The central bank also said over the weekend it will ensure sufficient liquidity to sustain economic growth, damping speculation regulators might seek to restrain credit.
  
  “The other reasons behind copper’s strength included the limited scrap supply and a rising demand from wire and cable makers as a result of government-initiated infrastructure projects in April and May,” Wu added.
  
  Copper has climbed 49 percent this year on the London Metal Exchange on speculation the worst of the global recession has passed. China’s imports of the metal jumped to a record in March as buyers took advantage of low prices to replenish stockpiles needed for the country’s 4 trillion yuan stimulus package.
  
  Inbound shipments in March advanced 14 percent from the previous month to 374,957 tons, the Beijing-based customs office said on April 10, citing preliminary data.
  
  Shanghai copper stockpiles also dropped 4,142 tons to 18,766 tons for the week just ended, the Shanghai Futures Exchange said on April 10.
  
  The London Metal Exchange is closed today for the Easter Monday vacation.

Shanghai copper at 6-mth high, boosted by China data

• By Nick Trevethan
  
  SINGAPORE, April 13 (Reuters) - Shanghai copper futures rose 7 percent on Monday, touching their upside limit for a second consecutive trading session, supported by continuing declines in stocks and positive industrial output and other data from China.
  
  Shanghai prices have surged 10 percent in the past two sessions while London was shut for the four-day Easter holiday, sending the premium for Chinese metal above 4,600 yuan ($673) a tonne accounting for China's 17 percent VAT, and likely to prompt a fresh wave of arbitrage dealing -- buying in London and selling in Shanghai.
  
  "Things appear to be coming together for copper. The data from China is coalescing into some pretty decent support for the market. Given the dependence of China on supplies from the international market, the gains in Shanghai are very likely to lift London when it re-opens," a dealer in Singapore said.
  
  Third-month June copper rose to 41,240 yuan a tonne at the open, up 2,690 yuan, or 7 percent, from Friday's settlement and its highest since mid-October. Prices have rallied 23 percent this month and are up 85 percent from December's lows.
  
  By the close, prices had retreated slightly to 41,110 yuan.
  
  "The Shanghai market is using the LME market holiday to push prices above 40,000 yuan," said Orient Futures Securities analyst Lin Hui.
  
  She added the rally, which started as a rebound after sharp declines, had snowballed with support from a rise in lending.
  
  "The key question is whether the wave of new projects prompted by loans and the government's stimulus spending will last."
  
  Chinese banks extended 1.89 trillion yuan in local currency loans in March, bringing the first quarter total to 4.58 trillion yuan, near Beijing's full-year target of at least 5 trillion.
  
  China's Premier Wen Jiabao said on Saturday industrial output growth rose to 8.3 percent in March from a record low of 3.8 percent in the first two months of the year. [ID:nPEK325406]
  
  Also supporting sentiment, China's imports of unwrought and semi-finished copper hit a record 374,957 tonnes in March, data showed on Friday.
  
  More bullish news emerged on Monday. China is planning a new economic stimulus package targeted at boosting consumption, the China Securities Journal reported, citing a senior official of the State Information Center.
  
  China has already announced a 4 trillion yuan ($585 billion) stimulus package to combat the economic crisis.
  
  Copper inventories in warehouses monitored by the exchange dropped 4,142 tonnes last week, to 18,766 tonnes, their lowest since early February.
  
  Aluminium fell 235 yuan to 13,250 yuan, lagging copper's huge rise, but still up 15 percent on the year. However the market lacks the fundamental support seen in copper and analysts question how sustainable current prices are.
  
  "Aluminium consumption is so-so, unlike copper demand, which is much better, thanks to the government stimulus spending on grid construction, among other things," Wang Feng, an analyst with Everbright Securities, said.
  
  "The last round of reserves purchases has ended. Quite a number of aluminium smelters have made plans to resume production. If there is no new reserve purchase plan, aluminium prices will go through an adjustment period." Base metals prices at 0717 GMT Metal Last Change Pct Move End 2008 Pct chg 09 SHFE Cu* 41110.00 2430.00 +6.28 23840.00 72.44 SHFE Alum* 13250.00 -235.00 -1.74 11540.00 14.82 SHFE Zinc 12930.00 270.00 +2.13 10120.00 27.77 Dollar/yuan 6.8325 \ 6.8328 * 3rd contact month for SHFE aluminium, copper and zinc (Additional reporting by Rujun Shen in Shanghai) (Editing by Clarence Fernandez) ($1=6.833 Yuan)
  

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A bit about Copper

Read an interesting comment posted by Rob Kirby on copper: Contrary Views on the News

This section is worth reading:

>>>>

China And Base Commodities In Context, Perhaps?

So, while empirically – a current chart of the price of copper looks like this;

We might be well advised to remember that while this graph illustrates the price of copper falling off a cliff – it really only mirrors the U.S. housing industry to a tee. Perhaps we should all stop and take stock of what is going on regarding copper in China. Remember folks, copper is essential to the build out of infrastructure – equally as is nickel.

Has anyone [namely the copper bears] stopped to consider the non-confirmational behavior of nickel recently? Take a look:

Last I read was that China is still expecting GDP growth of double digits++. The dynamic driving infrastructure build out in China is vastly different than “home building in the U.S.” Firstly, in China – infrastructure build out is the NATIONAL POLICY of the best heeled purchaser [the Chinese Gov’t] the planet has ever seen and they keep getting RICHER – as evidenced by their swelling foreign reserve account.

While the U.S. consumer is SPENT – we’ve all known that for a long time.

Now, China’s exports to the U.S. account for roughly 8% of Chinese GDP. If this trade was cut to ZERO – and how likely is this? – China would likely still have substantially positive GDP growth.

Additionally, while the Chinese are well known to be “hoarders” – in the past they have been shown to be totally absent from [or even sellers in] strategically important markets which they CATEGORICALLY MUST be major buyers in – but only for short periods of time – like here and now in COPPER.

For those with good memories, it was just a couple of years ago that a China Aviation Oil blew up “shorting oil” – or jet fuel to be more exact – and then hid the loss. I’m sure everyone can appreciate the FACT that China is CATEGORICALLY NOT a REAL exporter of petroleum products.

In the meantime – the charts are all “set up” so that a strategic PUSH by a major industry/futures player [like a large investment bank/futures player, perhaps?] on copper in the next few days will have every Technician in the bloomin' world pressing the ejector seats on their positions with CNBC, Bloomberg et al right at their sides TRUMPETING – and giving the play-by-play demise of the commodity bull.

Remember folks, asset prices like base commodities are set in global markets – if markets really are “free” – and have been raising largely in response to excessive money [debt] and credit creation. While a housing slump in the U.S. has a definite effect on domestic U.S. demand, growth [and ultimately price] at the margins in many of these base commodities is now set in foreign lands.

I’ve said it before but it bears repeating, stockpiles of too many of these strategic base commodities are at historic lows – until that picture fundamentally changes – everyone should treat their investments in companies that produce them accordingly.

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