Copper declined for the first time in seven days as industrial metals fell on concerns that China’s efforts to tame inflation even as the economy slows may reduce demand.
Three-month delivery copper on the London Metal Exchange retreated as much as 1.1 percent to $9,171 a metric ton and traded at $9,172 by 3:06 p.m. Shanghai time. The contract lost 5.7 percent in August, the first drop in three months. Zinc fell 1.7 percent today to $2,252.25 a ton.
A manufacturing index in China, the biggest copper consumer, stayed near the borderline between expansion and contraction in August. The Purchasing Managers’ Index rose to 50.9 from a 29-month low of 50.7 in July, with new export orders falling to 48.3 from 50.4 of the previous month, the China Federation of Logistics and Purchasing said in a statement today. A reading above 50 indicates an expansion.
“Data showed there is no hard-landing risk,” Zhang Yu, an analyst at Yong’an Futures Co., said by phone from Hangzhou. Still, the expectation is that monetary tightening measures will remain in place as inflation is unlikely to ease soon, she said.
Five interest rate increases since October, limits on home purchases and lending curbs that included raising banks’ reserve requirements to a record are slowing domestic demand in the world’s second-largest economy. Inflation reached a three-year high of 6.5 percent in July.
Premier Wen Jiabao said that a faltering global recovery and turbulence in financial markets have yet to convince his government to switch from a focus on taming inflation. The slowdown in the economy is “reasonable” and within government expectations, Wen wrote in an article in the ruling Communist Party’s Qiushi magazine published today. An abstract was posted on the government’s website yesterday.
Copper for November delivery on the Shanghai Futures Exchange dropped 0.3 percent to 68,190 yuan ($10,689) a ton.
Wen’s comments have “smashed” speculation that the government may loosen its tightening grip and made investors realize that inflation is still at the top of its agenda, said Ye Yanwu, head of research at Everbright Futures Co.
“Fundamentally, upside for metals remains capped,” Walter de Wet, an analyst at Standard Bank Plc., said in a research report yesterday. “As a result, a rally in base metals is more likely to be on an increase in speculative activity rather than more sustainable real demand.” Copper is facing technical resistance between $9,220 and $9,300, he said.
Aluminum in London lost as much as 0.3 percent to $2,461 a ton. Buyers in Japan, Asia’s largest importer, agreed to pay a premium of $118 a ton for the fourth quarter this year over the cash contract on the LME, 2 percent lower from $120 for the third quarter. This was the first drop in three quarters amid abundant supplies as smelters in the Middle East boosted shipments to Asian buyers.
Lead dropped 1.2 percent to $2,548 a ton, and tin declined 1 percent to $24,150 a ton. Nickel fell 0.7 percent to $22,043 a ton.