Copper Sags as China Stimulus Move Fails to Stem Demand Concern

  • Top consumer China cut reserve ratio by 0.5 percentage point
  • Zinc's back at premium to lead amid shortage expectations

Copper had a fourth decline in five sessions on speculation that China’s efforts to stimulate its economy will fail to rekindle demand growth in the world’s biggest metals consumer.

China’s central bank cut the reserve ratio amid plunging stock prices and a weakening currency. Global equities headed for a fourth monthly decline amid mounting concerns about slowing world growth. Copper has lost more than 20 percent in the past year.

“People have been burned buying based on the fact that China has been easing” monetary policy, James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “That kind of monetary policy hasn’t done anything for their industrial growth.”

Copper for delivery in three months slipped 0.2 percent to settle at $4,695 a metric ton ($2.13 a pound) at 6:16 p.m. on the London Metal Exchange. On the Comex in New York, copper futures for May delivery rose 0.4 percent to $2.1325 a pound.

The required reserve ratio for the banks will drop by 0.5 percentage point effective March 1, the People’s Bank of China said on its website Monday. The move marks a return to more traditional easing after the central bank indicated in recent weeks it would spur growth by guiding interbank markets lower and injecting liquidity through open-market operations.

Zinc for delivery in three months gained, taking this month’s advance to 8.7 percent, the steepest climb since April. Prices are rising as production cuts by companies including Glencore Plc heightened investors’ expectations of impending shortage. The metal’s premium over lead reached $64.50 on Feb. 24, the highest since September.

“Zinc has tightened,” Steve Hardcastle, industrial commodities client-services chief at broker Sucden Financial Ltd. in London, said by phone. “There is a perceived shortage of concentrate looming in the not-too-distant future, so fundamentals are a little bit stronger. Lead has been running very strongly in the last few weeks, so there is a perception that maybe lead is running its course while zinc has more on the upside.”

  • Lead, aluminum and nickel gained on the LME, while tin slipped
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