Shanghai copper up, LME tin hits record

SINGAPORE: Shanghai copper futures rose on Wednesday after London futures came within 2 percent of a record high overnight as investors gambled that a weak dollar and supply problems would outweigh slowing Chinese imports. Supply worries also lifted London tin futures to a new record high. The July copper contract, the most active on the Shanghai Futures Exchange, rose 390 yuan, or 0.6 percent, to 64,780 yuan ($9,270) a tonne at the midday break. Copper for delivery in three months on the London Metal Exchange fell $45 to $8,655 at 0350 GMT, but still held near last week's record high of $8,880.

"A squeeze will probably develop in London soon and push prices up to challenge the all-time highs," said an analyst at Jiangxi Copper, China's largest copper refiner. But he expected Shanghai prices to remain relatively stable. "We have noticed that some traders are switching to agricultural commodities from metals in Shanghai. That means that Shanghai prices will continue to lag behind the LME and the spread between the two markets could widen further." The gap between London copper and the Shanghai market widened to 6,019 yuan from 5,142 yuan on Tuesday, including Chinese value-added tax -- enough for merchants to divert China-bound shipments to London Metal Exchange warehouses. On Friday, the spread hit a record 6,549 yuan.

London copper prices have been supported by a record low in the dollar and a week-long strike by subcontracters at Chile's Codelco, which the company said is costing $10 million a day. That translate to around 1,000 tonnes a day of lost production at current prices. "The copper price is not a demand issue, it's all about supply. Projects keep getting delayed, ore grades are falling and the strikes and disputes are not going away," a dealer in Singapore said. "We are looking for a spike to $10,000 to $12,000, and I see copper averaging above $8,000 a tonne this year."

In a Reuters poll at the start of the year, forecasters pegged average copper prices at $6,737 a tonne. Apparent copper demand rose just 0.7 percent to 1.185 million tonnes in the first quarter, weighed down by a 19 percent slump in imports. But analysts said continued robust economic growth was a sign that destocking -- rather than soft underlying demand -- was to blame for the numbers.

"We have always thought there was metal sitting around in China, so we shouldn't be surprised to see copper appearing like this," the dealer said. LME tin touched a record high of $22,940 a tonne, gaining 2 percent as the market fretted about supplies from the world's biggest exporter and second biggest producer, Indonesia. At midday, tin was quoted at $22,400. In addition to a crackdown by Indonesian authorities on illegal mining, trade data on Tuesday showed China, the world's No.1 producer, exported a meagre 366 tonnes in the first quarter. Imports of 3,742 tonnes, primarily sourced from Indonesia, were double last year....