Copper imports by China, the largest consumer, climbed 29 percent in March from a two-year low as fabricators stepped up production. Shipments fell 33 percent from the same month last year.

Inbound movements of copper and products were 304,299 metric tons compared with 235,469 tons in February and 456,240 tons in March 2010, according to the General Administration of Customs. The February level was the lowest since January 2009.

While the increase from the previous month reflected a recovery in manufacturing which grew for the first time in March in four months and the Chinese New Year holiday in February, the decline from last year may boost concern over whether the level of demand in the country is being sustained. Domestic prices have traded at a discount to London since July on ample supplies.

"The fall in imports from a year ago reflects the negative arbitrage we've seen in the past few months," Peng Bo, an analyst at Guosen Securities Co., said from Shenzhen. "While we think it's still too early to say demand from China has dropped, it's something to watch out for in the coming months."

Copper consumption in the world's second-biggest economy usually increases from March to May when fabricators boost output to meet demand from air-conditioner and household- appliance makers. The Purchasing Managers' Index rose to 53.4 from 52.2 in February, the China Federation of Logistics and Purchasing said April 1.

Demand Concern

"Many market participants placed high hopes on seasonal demand, so they chose to ship more in March," Wang Zhouyi, an analyst at Shanghai CIFCO Futures Co., said by phone before the figures were released. "Arrivals in March are usually higher than February, which tend to be affected by the long holidays for Chinese New Year."

Copper stockpiles monitored by the Shanghai Futures Exchange climbed to a 10-month high of 177,365 tons in the week ending March 18. They dropped 7,687 tons last week to 154,229 tons, according to a survey of 10 warehouses in Shanghai.

"March imports fell from last year," Yan Lei, an analyst at Guoyuan Securities Co., said from Shanghai today. "We understand consumption in March was similar to last year's levels, which could only mean that smelters really ramped up domestic production. If the output numbers don't show that, it may be time to start worrying about China's copper demand."

Slowdown Risk

China has increased interest rates four times in less than six months and boosted reserve requirements three times this year to mop up liquidity and tame inflation. Economists polled by Bloomberg News forecast the consumer price index may rise 5.2 percent in March from a year earlier. The National Bureau of Statistics will release the March data on April 15.

"There is a risk that a slowdown in the economy because of the tightening measures will damp metals demand," said Ren Gang, head of research at Maike Futures Co. "We still need to keep a close eye on macro-economic developments."

China imported 390,000 tons of scrap copper in March, up from 250,000 tons in February and 364,883 tons in March last year, customs data showed. Imports of aluminum and the metal's products were 87,729 tons in March compared with 60,202 tons the month before and 95,050 tons in March last year.

Source: Bloomberg