Copper May Drop in New York on Speculation About Weakening Chinese Demand
Copper may fall for a second day in New York on speculation that demand will weaken in China, the world’s top consumer, after the government reaffirmed a commitment to curb lending.
Housing policies such as lending rules will be enforced “strictly” to prevent speculative investment, China’s Ministry of Housing and Urban-Rural Development said today. Concern about efforts to rein in the country’s surging economy helped to pull copper down by 17 percent in the second quarter.
There is “concern about China’s determination to cool real-estate markets,” Marc Elliott, an analyst at Fairfax IS in London, said in a report.
Futures for September delivery were little changed at $3.0085 a pound at 8:03 a.m. on the Comex in New York. Copper for delivery in three months gained 0.2 percent to $6,642 a metric ton on the London Metal Exchange.
Futures have dropped 10 percent this year on concern that Europe’s sovereign-debt crisis may hamper economies, crimping usage of metals. Portugal’s credit rating today was cut two levels to A1 at Moody’s Investors Service, citing a growing debt burden and weak economic growth prospects. German investor confidence declined for a third month in July. The Mannheim- based ZEW Center for European Economic Research said today its index of investor and analyst expectations fell to a 15-month low of 21.2 from 28.7 in June.
Copper prices have also retreated this year as the dollar strengthened, making metals priced in the currency more expensive in terms of other monies.
Dollar Pares Gains
The U.S. Dollar Index, a six-currency gauge of the dollar’s strength, was little changed, after earlier rising as much as 0.4 percent. It has gained 8 percent this year.
China’s benchmark stock index today declined the most in two weeks after the government quashed speculation it would abandon real-estate curbs that drove property prices lower for the first time in 16 months. Demand from the Asian nation for copper, used in electrical equipment and construction, helped to lift LME prices by 34 percent in the past year.
“The impact of attempts to curb speculation in the Chinese property sector is uncertain, but continues to weigh on sentiment,” Daniel Major, an analyst at RBS Global Banking & Markets in London, said by phone.
Figures due on July 15 probably will show that growth in China’s gross domestic product slowed in the second quarter, dropping to 10.5 percent from 11.9 percent in the prior period, according to economists surveyed by Bloomberg News.
Inventories Contract
Copper stockpiles tracked by the LME shrank for an 18th day to 432,550 tons, the lowest level since Nov. 26, according to a daily report. They’re down 14 percent this year and headed for the first annual drop since 2004. Bookings to remove metal from LME warehouses fell for a fourth day, down 0.6 percent to 27,175 tons.
Aluminum for three-month delivery on the LME fell 0.3 percent to $1,965 a ton. Alcoa Inc., the largest U.S. producer, reported better-than-estimated second-quarter profit yesterday and said stronger demand from end-use markets will mean a 12 percent increase in global consumption this year, more than the 10 percent it had forecast.
Smelters in China, the world’s largest maker of the lightweight metal, may idle as much as 1.5 million tons of capacity in the third quarter because prices have dropped below some producers’ costs, Klaus Kleinfeld, Alcoa’s chief executive officer, said yesterday.
LME-monitored aluminum inventories dropped for a fourth day to 4.38 million tons, the lowest since June 29, 2009. Lead rose 0.4 percent to $1,791 a ton and nickel gained 0.8 percent to $19,350 a ton. Zinc slid 0.6 percent to $1,845 a ton and tin rose 1 percent to $17,700 a ton.
To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.
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