Copper dropped for the first time in three days in London on speculation that demand may wane as China, the world’s largest consumer, curbs bank lending in an effort to cool its economy.
A nationwide lending halt in China that started on January 19 may trigger a “meaningful” drop in manufacturing, said Dong Tao, an economist at Credit Suisse Group AG. Figures last week showed that Chinese economic growth and inflation topped forecasts. The nation accounts for 27 per cent of global copper demand, according to Goldman Sachs Group Inc.
“The market is wary about China,” Robin Bhar, an analyst at Credit Agricole SA’s Calyon division in London, said.
Copper for three-month delivery fell $100, or 1.3 per cent, to $7,365 a tonne at 10.53 am on the London Metal Exchange (LME), erasing this year’s gain. Copper for March delivery slid 1.4 per cent to $3.347 a tonne on the New York Mercantile Exchange’s Comex unit, almost wiping out 2010’s climb.
Five of the six main metals, traded on the LME, dropped with zinc the only one to climb. Copper producer Kazakhmys Plc and other mining companies posted five of the 10 biggest declines in the UK benchmark FTSE-100 Index of shares.
Copper may fall to about $7,190 a tonne, Bhar added. Any slide is likely to be limited by buying from consumers and investors who expect higher prices, he said.
Metals also slid as the dollar strengthened, making metals priced in the currency more expensive for holders of other monies. The US Dollar Index, a six-currency gauge of the greenback’s strength, rose as much as 0.4 per cent after three declines in a row. It has advanced 0.7 per cent in 2010.
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China’s central bank has also moved to curb credit, ordering banks to raise the ratio of deposits they hold in reserve. That limited the amount of cash available for lending.
The country’s gross domestic product expanded 10.7 per cent in the fourth quarter and inflation accelerated to 1.9 per cent in December, figures showed last week. Both exceeded estimates from economists surveyed by Bloomberg. China’s economy will expand 9.5 per cent this year, compared with 8.7 per cent in 2009, according to the economists surveyed.