Network Metals LLC

Once again, the numbers don’t tell the full story. Chinese copper imports are up dramatically for the fourth straight month; unfortunately the uninformed are using these statistics to paint an extremely bullish picture of Chinese copper demand. However, our take on these numbers is that the large trading companies that took advantage of the SHFE (Shanghai Futures Exchange) positive arbitrage over the LME during 1Q09 are now shipping material to cover their geographic short positions. Hence LME stocks will go down, and Shanghai stocks should rise. To reiterate, we don’t view this as an excessive amount of new copper demand from China, but rather just a shifting of metal units from the West to the East.