June 12 (Bloomberg) -- Copper fell to the lowest in six weeks in New York amid concern that use of the metal as collateral will slow amid an investigation into warehousing at China’s Qingdao port.
China’s State Reserve Bureau, the agency that stockpiles strategic commodities, joined banks including Standard Chartered Plc, Citigroup Inc. and Standard Bank Group in reviewing potential fallout from alleged fraud involving metals pledged to obtain loans. Copper has fallen 3.5 percent this month on speculation that the probe may curb copper inventory financing, a source of demand.
“The Qingdao probe has been a drag on copper,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “Those financing deals are out of favor. The thought is that those commodities are entering the market place now” as finance deals using copper are unwound, he said.
Copper futures for delivery in July slipped 0.8 percent to settle at $3.0155 a pound at 1:18 p.m. on the Comex, after touching $3.0125, the lowest for a most-active contract since May 1.
On the London Metal Exchange, copper for delivery in three months fell 1 percent to $6,620 a metric ton ($3 a pound).
Chinese officials are looking into whether metals warehoused at Qingdao fell short of obligations used to secure loans and are focusing on Decheng Mining, according to two bankers assisting the inquiry.
The investigation is unlikely to “break” the copper market, Bank of America Corp. said in a report yesterday. Even if some financing accords involving copper were unwound, the amounts directly involved probably would come to less than a day of Chinese demand, according to the bank.
Stockpiles of copper tracked by the LME slumped 55 percent this year to 165,725 tons, the lowest level since August 2008, according to data compiled by Bloomberg.
Aluminum, lead, nickel, tin and zinc declined in London.
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