China’s copper imports are slowing after record purchases, likely ending an 81% price rally this year, according to Sumitomo Metal Mining Co., Japan’s second-largest smelter of the red metal.

“Excessive imports mean much of the purchased metal was just stored, raising the risk that they may sell it back to the market and depress prices,” said Koichi Kaku, general manager at Sumitomo. “Imports may have exceeded manufacturing demand by as much as 1.3 million metric tons in the first half,” he continued.

Still, a few folks remain bullish on copper’s short-term prospects. One such analyst is Jim Lennon with Macquarie in London, who recently told Reuters:

“From a stocking perspective China is not going to be as big a factor but actually from a real consumption perspective… it’s going to be a lot stronger. We don’t see an easing up in Chinese demand.”

Time will tell who is correct, but we’re betting on a short- to medium-term downward correction followed by a huge run-up when inflation kicks in.

Source: Base Metals Higher

“The overall sentiment in the metals market has improved a lot,” said Yingxi Yu, an analyst at Barclays Capital. “It has not much to do with the dollar, but follows stock markets closely, as the second quarter’s corporate earnings were broadly better than expected, improving outlook on the economy.”

Copper supply concerns also underpinned the bullish sentiment. Violence was reported near Freeport-McMoRan’s massive Grasberg mine in Indonesia, and a power problem occurred at Anglo American’s Chilean Collahuasi copper mine, but so far neither has reported serious production disruptions.

But with copper near nine-month highs some analysts and market participants warn not to get your hopes up too much just yet.

“Despite these supply-side concerns, we find it hard to make the case for anything approaching a runaway bull market in copper (or any of the metals for that matter) given the still sluggish rate of growth noted in most economies,” said analyst Edward Meir at MF Global.

“I don’t think copper prices climbed because of a dramatic improvement in supply-demand conditions,” said Koichi Kaku, general manager of Japan’s second-largest smelter of the red metal, Sumitomo Metal Mining Co. “I’m skeptical about a strong recovery in the market.”

Meanwhile, LME copper stockpiles rose again on Thursday, up 3,225 metric tons to a one-month high of 271,725 metric tons.

Source: Base Metals Mixed

Bloomberg reported that Output at Collahuasi mine in Chile, the world’s largest producer, will likely be cut following an “incident” that involved electrical equipment, according to a union leader. This comes at a time when China’s imports of the metal surged to record levels for a fifth month in June.

“A lot of fund money has been flowing into the copper market in China,” Wang Zhouyi, analyst at China International Futures (Shanghai) Co., said yesterday. “Many investors are very optimistic about economic recovery and so any news about potential output shortfall is good news for the market.”

The damage at Collahuasi, which is controlled by Xstrata Plc (LON:XTA) and Anglo American Plc (NASDAQ:AAUK), is being assessed, a Xstrata spokeswoman said yesterday. The mine produced 415,000 tons of copper last year.

In company specific news, Reuters reported that a Chinese firm plans to invest about $3.6 billion in copper exploration and mining in Zambia, reflecting growing Chinese interest in the country’s mineral wealth, a senior investment official said yesterday.

Zambia Development Agency (ZDA) Spokeswoman Margaret Chimanse said Zambia and Zhonghui Mining Group signed an investment agreement on Tuesday.

“The $3.6 billion will be invested by Zhonghui in the first five years (from 2009) and it is likely to be increased depending on economic factors affecting the copper industry,” Chimanse told Reuters.

Source: Copper Hits New High for Year

China imported 378,943 metric tons of refined copper last month, a 12% increase from May and the fifth straight record, customs office data showed yesterday.

“Demand should ease after builders filled orders for the summer construction peak and the margin between China and London prices narrowed,” said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co.

“July imports should definitely come off from these record levels as the arbitrage window has closed and we move into the slow consumption season. Demand in June was definitely weaker than in May, but comparable to June 2008 levels,” Pang added.

In company specific news, the world’s sixth-largest steelmaker, Tata Steel Ltd, raised $500 million in a sale of global depositary receipts to fund domestic expansion [in India] and mining ventures overseas.

Tata sold 65.4 million shares at $7.644 each, according to a statement sent to the Bombay Stock Exchange, the second-biggest overseas stock sale by an Indian company this year. The shares, sold at a 6% discount to yesterday’s close in Luxembourg, will be listed in London, the statement said.

Finally, in the on-going saga of the “ (NYSE:RTP) Rio Tinto Four,” China’s Vice Foreign Minister He Yafei announced yesterday he told Australia Foreign Minister Stephen Smith at a recent meeting China has sufficient evidence Rio Tinto staff got state secrets through illegal means.

“I’ve introduced the information about the case to him and stressed we have sufficient evidence to show that people involved in the case have obtained our state secrets through illegal means,” He said.

“The case has entered the legal process…I told him we aim to get an outcome from the case as soon as possible but of course we need to fully complete the legal process first,” He added.

Source: Copper Takes a Step Back

Copper closed at its highest price this year on Friday, also boosted by the unexpected jump in U.S. home construction data.

The big boost in U.S. housing permits coupled with weakness in the U.S. dollar and a strong expansion in China’s economy combined to drive the price of copper up nearly 10% on the week, said Michael Pento, chief economist with Delta Global Advisors.

“An upper-cut, a left hook, and a body blow … what a three-punch combination to power copper up through its $2.40 resistance level,” he said.

Despite the stronger tone this week, analysts still remain somewhat skeptical about further upside price potential.

“Is it all built on a foundation of sand?” asked Calyon analyst Robin Bhar. “[Copper] will struggle to sustain these prices over the coming couple of months.”

Meanwhile, copper stocks at LME warehouses rose 3,275 metric tons to 264,150 tons from levels around 500,000 tons in early April.

Concerns about nearby supplies have arisen because LME data for several days now has shown a dominant position controlling between 50% and 80% of LME stocks.

The worry reflected the premium, or backwardation, of about $10 a metric ton for LME cash copper over the three-month contract. This compares to a contango of $14.50 on July 8.

“The backwardation [isn't] a sign that consumption is strong. There are genuine concerns about long-term demand,” a trader said. “Backwardation is a function of nearby tightness in the market, short positions being rolled forward.”

Source: Base Metals in the Black

“The market is watching out for Chinese imports and stockpiles data and these will drive sentiment in the days ahead,” Jia Zheng, analyst at Southwest Futures Co., said yesterday.

“There is talk that around 100,000 tons of copper is making its way to LME warehouses in Asia in the next three weeks, and that is weighing a bit on sentiment,” said Jia.

China is expected to release preliminary trade data today or Monday, while weekly inventory data will be released by the Shanghai Futures Exchange after the market closes today.

In company specific news, BHP Billiton (NYSE:BHP), the world’s largest mining company, will begin a study for the potential sale of its Ravensthorpe nickel operations in Australia after closing the $2.2 billion project in January.

“BHP Billiton has received numerous expressions of interest from third parties regarding a possible acquisition of Ravensthorpe and will further test the market through this process,” the company said. BHP intends to finish an options study on the future of Ravensthorpe by December 2009.

BHP closed the Ravensthorpe nickel mine in Western Australia after nickel prices plunged. It sold the Yabulu nickel refinery in Queensland earlier this month to Australian billionaire Clive Palmer for an undisclosed sum.

It’s also worth noting that a Chinese firm started work on a copper deposit in Afghanistan yesterday as part of a multi-billion dollar project and the first major foreign investment of its kind in the country’s history.

State-owned China Metallurgical Group Corp (CMGC) and China’s top integrated copper producer Jiangxi Copper Co won a 2008 tender to explore and develop the vast Aynak Copper Mine south of the capital Kabul.

Aynak is thought to contain up to 13 million tonnes of copper and is regarded as one of the major ore bodies in the world.

The deposit was discovered in 1974 and surveyed by Soviet geologists in 1979, but has never been developed until now.

Source: Base Metals Listless

Nickel followed exactly the same path, plummeting below the $7 mark to close at $6.7018/lb., down 33 cents. Zinc was also beaten down, ending at $0.6745/lb., down nearly 2½ cents. Aluminum took a severe pounding, shedding 2 2/3 cents, to $0.6881/lb., while lead plunged, losing more than 2½ cents, to $0.726/lb.

Copper led the industrial metals’ swoon yesterday, reaching a fresh two-week low, as grim projections for the global economy put traders in a sour mood.

The global economy will contract by 1.4% this year, a much deeper cut than that forecast in April, and a sustained recovery may be a year away, the International Monetary Fund said yesterday.

Global economic growth will rebound to 2.5% next year, the IMF said, but noted that a “sustained pickup in activity” won’t occur in the world’s advanced economies until the second half of 2010.

In addition, there was nothing positive out of the G-8 summit, and eurozone figures were awful, with the regional economy skidding 2.5% in the first three months of this year from the 4Q08. That was the steepest decline since record-keeping for the zone began in 1995.

“There’s a lot of anxiety again about the recovery,” said Matthew Zeman, of LaSalle Futures Group in Chicago. “Some of the most recent data has been pretty disappointing and we are in the slow season for copper as well, so a lot of that talk we heard several weeks ago about ‘green shoots’ have turned brown, so to speak.”

Source: Base Metals Slump

Nickel followed a similar path, closing just off its intraday lows at $7.0322/lb., down 17 cents. Zinc didn’t come as far off its morning highs, and ended at $0.6987/lb., up more than three-quarters of a cent. Aluminum was little changed, shedding a quarter-cent, to $0.7153/lb., while lead also dropped a bit, losing a third of a cent, to $0.7518/lb.

Copper led most of the industrial metals lower yesterday, as an early rally was snuffed out by economic jitters.

“It’s a bit of hesitation we’re seeing today,” said Robin Bhar, senior metals analyst at Calyon. “Prices seem to have stalled in both equity and commodity markets … as this (economic) recovery hasn’t come through perhaps as quickly as everyone has wanted.”

And that has led to “some doubts as to whether growth is beginning to peter out,” Bhar added.

The early positive action was likely driven by the German manufacturing orders report, but that was not enough in the end for the metals to hold their gains.

After two days of advances, stockpiles reversed field abruptly and decisively yesterday. Inventories monitored by the LME fell 3,250 metric tons yesterday, to 265,925 tons.

Many observers are concerned that copper faces downward pressures as we enter a traditionally quiet trading period during which Chinese demand will ebb. UBS analysts wrote that copper imports by China may plunge 64% in the second half after record shipments earlier this year built up stocks.

The world’s largest consumer of the metal may cut refined copper imports to around 100,000 metric tons a month in July to December, from an average of 280,000 tons in the first five months, UBS speculated. It also estimated that China may have stockpiled 500,000 to 700,000 tons of copper in excess of its industrial needs in the first quarter.

Source: Base Metals Mostly Lower

Nickel followed a similar but less steep path, closing at $7.4382/lb., down nearly 23½ cents. Zinc was similar, just retreating from its intraday highs to end at $0.6904/lb., down short of a penny. Aluminum had a strong late-day rally but it wasn’t enough as it shed more than three-quarters of a cent, to $0.718/lb., while lead also sagged, dropping almost a half-cent, to $0.7582/lb.

Copper led the industrial metals lower yesterday amid economic worries and inventory gains, but rose sharply off of session lows when chart-based buying hit key technical trading levels.

For the first time in weeks, stockpiles showed gains on two consecutive days. Inventories monitored by the LME added 900 metric tons yesterday, to 269,175 tons. That followed a much larger jump of 4,050 tons on Friday.
On the other side of the world, Chinese stocks followed suit, with inventories monitored by the Shanghai Futures Exchange rising 7% last week, to 59,980 tons, from 56,088 tons a week earlier.

The double whammy of those rising stockpiles “and the stronger dollar is having a negative impact on prices,” said Donald Selkin, of National Securities Corp. in New York. “People are getting nervous about the outlook for copper.”

And recently, there has been a “change in sentiment, with the gradual realization that unemployment levels are rising and that this recession is going to run longer,” said Alex Heath, of RBC Capital Markets in London.

Concerning aluminum, anecdotal evidence suggests that at least 50% to 75% of the metal is held in LME warehouses under longer-term contracts, which brings lower rents for metal buyers, a Merrill Lynch report said.

“These volumes are not available to markets participants at arms lengths and this is one factor suggesting that aluminium prices may temporarily spike higher when demand starts to improve through 2H09,” the report said, but added that fundamentals for aluminum remain poor.

Source: Base Metals Slammed

Nickel had a pair of jagged ups and downs to mid-morning, but blazed higher from there, closing just off its intraday highs at $7.4382/lb., up 13 cents. Zinc was also choppy, ending little changed at $0.6994/lb., down a half-cent. Aluminum was weak, dropping more than a penny, to $0.7267/lb., while lead also sagged, shedding more than a penny and three-quarters, to $0.7626/lb.

Copper led all the industrial metals but nickel downward yesterday, as traders heeded the strengthening dollar and were spooked by bad economic data from both the U.S. and Europe that served notice a global economic recovery could be a long time in coming.

“When you have these continued weak employment reports, yes, they show maybe we are bottoming out, but there is no turn in any of the data,” said Bill O’Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey.

In addition to the grim unemployment numbers domestically and in the eurozone, the market also reacted to comments from the ECB about the length of the recession. However, the better-than-expected orders for manufactured goods helped keep a cap on the metals’ losses.

O’Neill added that, “If you take China out of the buying side of the market, you wouldn’t have a lot there. It’s going to be difficult for the market to break out of the current trading range in the third quarter because of the fact that we don’t really see the kind of demand outside of china that the market needs to extend these levels.”

In company news, Rio Tinto (NYSE:RTP) did a massive re-financing. The world’s third-largest mining company sold about 97% of the London-listed shares (508.6 million) on offer in a $15.2 billion sale to reduce debt.

Rio rejected a $19.5 billion investment proposal from its biggest shareholder, Aluminum Corp. of China, last month, and went with the share sale and an iron ore joint venture with BHP Billiton (NYSE:BHP).

Source: Base Metals Mostly Lower