Shanghai copper futures decline on concerns

Copper futures fell on the Shanghai Futures Exchange (SHFE) Friday mainly due to investors' concerns over an investigation into metal financing in Qingdao, Shandong Province, the mainland's third-largest port, according to a report by London-based metal information provider Metal Bulletin (MB) Friday.

The most-traded copper contract for August ended at 48,260 yuan ($7,721.6) per ton on the SHFE Friday, down 60 yuan or 0.12 percent from Thursday.

The market finished the week with a 0.78 percent loss. The trading volume fell by 64,122 lots Friday from Thursday's 339,820 lots.

According to MB, the investigation is about allegations of firms fraudulently using receipts from warehouses in the Dagang port terminal of Qingdao to get finance from banks.

Shanghai copper inventories have not been investigated yet, but concerns are rising that the investigation might be expanded to more warehouses, which will have a negative impact on the copper market eventually, the MB reported.

Meanwhile, some analysts expect the market to become better.

"The ongoing investigation about the Qingdao port is still impacting the metal. Once the Chinese situation is clear, we expect the rally to continue for the metal, unless there are some big discrepancies," Reuters reported Friday, citing Naeem Aslam, chief market analyst at Ava Trade.

In China, firms are allowed to use collateral such as copper to raise funds from banks. The Qingdao investigation led to a nearly 50 percent drop in Shanghai copper premiums last week, because some firms are selling their inventories on fears that they can't get inventory financing from banks, Reuters reported.

The report said the copper were traded at premiums of $70-$80 a ton last week, lower than $120-$130 a ton in the previous week.

However, some still hold an optimistic view on copper demand in the Chinese market in June this year.

Nearly 86 percent of domestic copper makers predicted their orders would remain stable in June, according to a survey conducted by the metal information provider Shanghai Metal Market Friday, covering 21 manufacturers in China.