Shanghai copper dips

Shanghai copper fell nearly 1 percent on Thursday as some investors worried that a move by China to scrap a 2 percent import tax on refined copper will boost imports of the metal and weigh on domestic prices. Shanghai's March copper contract the most active gave up its gains from the session and closed down 570-yuan at 58,280 yuan a tonne by the close.
"Some traders are concerned that the new trade policy will drive more refined copper importing to China, pressuring on the physical market and pulling down prices on both spot and futures market," a trader at an international house said. Shanghai's March copper is still 6 percent higher than a week ago after hitting its daily limit up on three trading days in a row in the past week.
Boosted by Shanghai's recent gains, copper for delivery in three months on the London Metal Exchange, trading for the first time since on Friday due to Christmas holidays, was up $125 or 1.84 percent at $6,920 a tonne. Spot copper prices in Shanghai were down 25 yuan, trading between 59,900 yuan and 60,250 yuan.
Spot premiums fell to around 200 yuan a tonne after touching an 18-month high of 2,000 yuan a week ago. China announced on Wednesday that it would remove import duties on refined copper, as well as on alumina and coal, boosting inflows and weighing on margins for copper smelters and alumina refiners that are already struggling with overcapacity.
The current 2 percent import tax for refined copper will be cut on January 1. Imports from Chile, a major exporter with a bilateral free trade agreement with China, are already duty-free. One trader said the effect on imports could be delayed as local customs officials will wait to implement the new policy until they receive official instructions from Beijing. During the month of November, Chinese imports of refined copper totalled 103,410 tonnes, up 5 percent from October but still slightly below traders' expectations.
In Zambia, finished copper production rose to 457,961 tonnes from January to October 2007, compared with 423,639 tonnes in the same period last year, central bank data showed on Wednesday. Some analysts are worried that growth in the world's copper production will soon ease the deficit and put pressure on prices.
Zinc prices were also firm, with Shanghai's March contract up 0.6 percent, or 120 yuan, to 19,370 yuan by Thursday's close, while LME zinc gained $55 to $2,470.
China said it would increase the export tax on low-grade zinc to 15 percent but keep high-grade zinc, which can be delivered on the futures markets in Shanghai and London, duty free. "The change will speed up a momentum in Chinese zinc smelters that producing more value-added high-grade zinc, and is partly a support to the country's leading smelters, which are encouraged to consolidate the fragment industry," said analyst Wu Peng at Jinrui Futures.