* Spot copper premiums fall a quarter to $150 over LME cash
* Premiums seen falling further as China supplies rise
* Aug arrivals seen at 300,000 T, Sept expected higher -
By Polly Yam
HONG KONG, Aug 30 Chinese buyers may cut
previously booked London Metal Exchange (LME) refined copper
stocks over coming months as arrivals into the world's top
consumer of the metal have built up inventories and weighed on
spot premiums, traders said on Friday.
Fewer shipments into China would mean more supply on the
international markets, which could blunt a rebound in prices.
London copper is still down nearly 10 percent on the
year, but is up more than $500 from a low hit in June.
Chinese importers have queued up to take LME stocks of
copper bought in June, when price differentials between Shanghai
and London were favourable for imports. They mostly paid
premiums of about $150-$160 a tonne over cash LME prices
The importers had planned to cash in as premiums later rose
to four-year highs of above $200. But spot premiums have since
fallen back to about $150 a tonne and are expected to fall to
$100-$130 in the coming two months, traders said.
"People are expecting premiums to fall and have been
unwilling to buy mostly in the past two weeks," a trader at a
large Chinese trading house said, referring to copper stocks in
bonded warehouses in Shanghai.
He said the arbitrage window had been mostly closed this
month, prompting some importers to store copper arrivals in
bonded warehouses, instead of paying the value-added tax and
reselling into the domestic market as previously planned.
The bulk of the earlier orders were scheduled to arrive in
China between July and October, leading to the rising inventory.
China's arrivals of refined copper were estimated at 300,000
to 350,000 tonnes for August, with imports likely to increase to
about 400,000 tonnes in September, traders said. Arrivals
included both spot and term shipments delivered from LME
warehouses and global producers.
Refined copper arrivals rose 5 percent in July from the
previous month, hitting a 10-month high of 291,846 tonnes,
official data showed.
Copper in bonded warehouses in Shanghai rose to about
400,000-460,000 tonnes, from around 370,000 tonnes in late July,
traders estimated. Stocks were still less than half of a record
one million tonnes hit in late January.
Traders said banks in China also remained cautious about
lending to small importers using bonded stocks as collateral
after forex authorities tightened controls over such business in
May, helping to cut demand. Lending on physical imports to the
domestic market stayed normal, they said.
The higher supply, poor arbitrage and restricted lending on
bonded stocks point to lower premiums.
"If premiums fall further, some importers may choose to
leave the metal in the LME warehouses," a trader at a large
Shanghai-based Chinese copper trading firm said.
He said importers, like his firm, that were still lining up
to take deliveries of the metal they had already bought from LME
warehouses could leave the metal there because lower premiums
would cause losses if they took the metal back to China.
It wasn't immediately clear how much of the previously
booked metal could be left in the LME warehouses.
Johor in Malaysia holds the largest stocks in LME warehouses
in Asia currently, with 202,150 tonnes on Thursday
MCU-MYJHB-CATS. Up to 75 percent of the Johor stocks are
booked for shipment, with the bulk expected to head to China.
(Editing by Tom Hogue)