SHANGHAI (Interfax-China) -- Shanghai Future Exchange (SHFE) copper stockpiles increased to 61,323 tonnes last week from only 24,148 tonnes at the beginning of 2008, due to weaker than expected domestic copper consumption, analysts told Interfax today.
"China's copper consumption will be weak this year as the U.S. economy enters a recession. As investment funds are pessimistic towards the U.S. economy and its consumption prospects, copper futures may enter a downtrend," analyst Xuanlong, from Huawen Futures, told Interfax.
Although domestic copper consumption may increase from the current level by June, consumption will fall long term along with prices, Xuan predicted.
The continued decrease of London Metal Exchange (LME) stockpiles may only be a speculative move by some big investment funds in the spot copper market, and not represent China's actual demand, which is reflected by the rising level of SHFE copper stockpiles, analyst Lu Chenghong, from Shence Investment, said.
London Metal Exchange copper stockpiles continued falling yesterday to 122,975 tonnes, and stocks may total only 100,000 tonnes if the delivery cancellations are calculated in, according to Lu.
Copper futures are still trading near record highs, and weakening demand has caused supplies to rise. China's copper production went up 7.0% year-on-year to 517,800 tonnes in the first two months of 008, so copper future prices are under heavy supply pressure, analyst Li Gang, from Xinhua Futures, said.
If China's copper demand cannot grow in the future, copper futures remain weak in China, Li predicted.
The June copper delivery on the Shanghai Future Exchange fell near the daily limit on Wednesday to end at RMB 62,730 ($8,885.3) per tonne. Domestic spot copper prices traded around RMB 64,100 ($9,079.3) and RMB 64,300($9,107.6) per tonne.
Shanghai Futures Exchange (SHFE) copper futures fell close to the daily limit today, amid the generally poor performance of domestic commodity futures. The most traded June delivery lost RMB 2,530 ($358.4), or 3.88%, to close at RMB 62,730 ($8,885.3) per tonne, and analysts say price could test RMB 60,000 ($8,499) per tonne in the near future
"London copper also fell heavily overnight night, mainly due to the generally gloomy sentiment in commodities markets as investors are becoming increasingly concerned about the weakening world economy and weak copper consumption," analyst Wu Jianjian from Yong'an Futures told Interfax,
"London copper may touch $7,300 per tonne while Shanghai copper may fall to RMB 60,000 ($8,499)," Wu added
(c) Interfax-China 2008. For further information regarding Interfax China Commodities Daily Reports, contact David Harman at david.harman@interfax-news.com.
