Copper dropped for the first time in four days in Asia after a price advance to a 13-month high deterred buyers amid speculation supply may outpace demand in China, the world's largest metals consumer.

January-delivery copper on the Shanghai Futures Exchange lost as much as 1.8 per cent to Y50,930 (Dh27,389) a metric tonne and closed at Y51,160. Immediate- delivery copper in Changjiang, Shanghai's biggest cash market, was at Y50,500 a tonne yesterday.

Copper for delivery in three months on the London Metal Exchange fell for a second day, slumping as much as 0.8 per cent to $6,559.75 a tonne.

It last traded at $6,580.5 a tonne. The metal used in construction and automobiles rose to a 13-month high of $6,732 a tonne on Monday, after a report showed China's copper imports expanded for the first time in three months.

Shanghai's copper market has been in a contango, where metal for immediate delivery is cheaper than supplies with later delivery dates, since last week, said China International Futures analyst Wang Zhouyi. That may suggest lower near-term demand or ample short-term supply.

"Chinese buyers have always been price sensitive," Wang said. "Many consumers have reverted to hand-to- mouth purchases."

Premiums paid by Chinese importers, typically a good indicator of demand, fell to less than $70 a tonne over the LME cash price last week, down from this year's high of around $280 in April.

"Overseas investors view higher imports as strong demand and thus prices go up," said Yuan Fang, a trader at Shanghai East Asia Futures.

"Domestically, investors aren't thrilled because concerns about oversupply in the market are building."

However, a senior executive at Sucden Financial said Chinese investors holding metal inventories are unlikely to sell them quickly because of adequate levels of cash on hand.

The downside risk to metals prices is limited due to high liquidity, said Jeremy Goldwyn of London-based Sucden.

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