Copper, Zinc Decline as Chinese Manufacturing Report Fuels Demand Concern

Thursday, Jul 01, 2010

Copper, aluminum and zinc dropped after manufacturing in China, the world’s largest metals consumer, expanded at a slower pace for a second month, signaling that demand growth may be weakening.

Three-month delivery copper fell as much as 2.4 percent to $6,360 a metric ton on the London Metal Exchange, and traded $6,369 at 3:04 p.m. in Shanghai. Aluminum declined 1.8 percent to $1,942.50 a ton and zinc lost 2.4 percent to $1,750.

The Purchasing Managers’ Index fell to 52.1 from 53.9 in May, the Federation of Logistics and Purchasing said today. That was less than the median 53.2 estimate in a Bloomberg survey of 12 economists. Asian equities headed for a third day of losses, extending a global first-half slump.

“Equities’ slump signals a bearish outlook for the economy” and metals demand, Tan Wentao, an analyst at HNA Topwin Futures Co., said from Shanghai.

Moody’s Investors Service said it may cut Spain’s top credit rating. The Reuters/Jefferies CRB Index of 19 raw materials fell 5.4 percent in the second quarter, the worst three-month period since the end of 2008, on signs growing budget deficits from Greece to Spain may stunt the global economic recovery.

“The likelihood is very high that copper may test previous lows given economic fundamentals are” turning bearish in the middle of the year, Wang Jian, an analyst at Minmetals Haiqin Futures Co. said from Beijing today. Copper touched an eight-month low of $6,037.50 on June 7.

China’s government has told banks to set aside more money as reserves, and cracked down on property speculation. Clamping down on local-government borrowing to contain risks from last year’s explosion in debt could also limit growth.

Copper for October delivery fell as much as 1.5 percent to 51,040 yuan ($7,524) a ton on the Shanghai Futures Exchange and closed at that level. Shanghai aluminum dropped 0.6 percent to 14,605 yuan and zinc declined 0.8 percent to 14,500 yuan.

Lead for three-month delivery in London fell 2.1 percent to $1,713 a ton, nickel slumped 2 percent to $19,350 a ton and tin lost 0.7 percent to $17,300 a ton.

Source: Bloomberg