Copper futures dropped the most in more than two weeks amid concern that a plan to cut interest rates won’t be enough to boost demand in China, the world’s largest metals user.
The People’s Bank of China reduced rates for the third time in six months, trimming the one-year lending rate 0.25 percentage point to 5.1 percent, effective Monday. Copper has lost about 8 percent in the past year amid signs of ebbing expansion in the Asian nation.
China is bolstering stimulus as reports signal the economy may struggle to meet the official growth target of about 7 percent. With the property market slumping, capital flowing abroad and local governments embroiled in a complex debt cleanup, economists anticipate further easing.
“Businesses in China need funds rather than lower interest rates; if they don’t have money it doesn’t matter how expensive money costs to borrow,” Richard Fu, the director of Asian commodity trading at Societe Generale Newedge U.K. Ltd. in London, said by telephone. “Even if they think copper is cheap they have limited firepower to buy it because they don’t have enough cash, liquidity is tight.”
Copper futures for July delivery slid 0.6 percent to settle at $2.903 a pound at 1:18 p.m. on the Comex in New York, the biggest decline for a most-active contract since April 22.
While the move by the central bank sparked a rally in Chinese equities, it “hardly has done much for the commodity markets, as the feeling is that China may continue to slow despite the easier credit,” Edward Meir, an analyst at INTL FCStone in New York, said in a report.
On the London Metal Exchange, copper for delivery in three months slid 0.4 percent to $6,365 a ton ($2.89 a pound).
Aluminum, zinc, lead, nickel and tin also dropped on the LME.