China recovery hopes spark rise in copper

Copper prices hit a near-six- month high yesterday as the base metals sector staged a broad advance amid mounting optimism that China's economy was on course for a rapid recovery, helped by its government's stimulus package.

Copper rose 2.4 per cent to $4,670 a tonne after spiking to $4,925 a tonne in Asian dealing hours.

Traders said there had been exceptionally heavy volumes traded in Shanghai, equivalent to 4.75m tonnes, following news of record Chinese copper imports in March, up 13.8 per cent compared with the previous month.

Shanghai copper prices continued at a substantial premium to global prices. This arbitrage opportunity has continued to draw metal into China, where merchants and traders expect further buying by the Chinese government to replenish strategic stockpiles.

Optimism about the outlook for China's economy has been fuelled by a strong rise in bank lending, suggesting the government's support package is being implemented aggressively.

“The surge in credit growth has been mainly driven by the policy stimulus, which requires a large amount of funding for investment projects,” said Goldman Sachs. “The government will be in no rush to impose strict lending controls at this stage, given the recovery is still at a very fragile stage.”