Copper fell, capping the biggest weekly drop in three months, as signs of slowing scrap-metal purchases and bank lending in China fueled concern that demand will weaken as the global economy sputters.
Scrap discounts to new metal widened 25 percent in the past three months as demand slumped in China, the world’s biggest user, according to Metalsco Inc., a St. Louis-based recycler. In China, banks extended 623.2 billion yuan ($99.5 billion) of loans last month, below the 700 billion yuan median estimate of analysts in a Bloomberg survey. In September, copper rose the most since January as central banks expanded stimulus measures.
“There’s not much evidence that the demand side of the equation is really as good as prices have suggested,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, Jersey, said in a telephone interview. “Scrap is a very good leading indicator of copper prices, and when we see weakening in scrap, it’s a signal that demand isn’t particularly strong.”
Copper futures for December delivery slid 1.3 percent to close at $3.703 a pound at 1:20 p.m. on the Comex in New York. The price fell 2 percent this week, the most since July 6.
The International Monetary Fund this week reduced its estimates for Chinese growth in 2012 and 2013 and also cut projections for worldwide expansion.
No. 2 scrap, a benchmark product, is trading almost 40 cents below Comex futures, Bret Tauben, a trader and part owner at Metalsco, said in a telephone interview. That compares with a discount near 30 cents in the third quarter, he said. Buying interest from China has been weak, he said.
Copper production will exceed demand by 293,000 metric tons next year, compared with a deficit of 102,000 tons this year, Credit Suisse has estimated. Fourteen analysts surveyed by Bloomberg said they expect the metal to drop next week, seven were bullish, and 10 were neutral.
On the London Metal Exchange, copper for delivery in three months fell 1.3 percent to $8,130 a ton ($3.69 a pound). Zinc, nickel, aluminum lead and tin also dropped.