Copper Drops on Speculation Demand May Ebb as China Curbs Loans

Jan. 26 (Bloomberg) -- Copper prices dropped for the first time in three sessions on speculation that demand may wane as China, the world's largest consumer, moves to cool its economy.

Chinese banks have begun restricting new loans, responding to a push by regulators. The nationwide halt that started Jan. 19 may trigger a "meaningful" drop in manufacturing, Dong Tao, an economist at Credit Suisse Group AG, said in a report. Copper prices more than doubled in 2009 as China's imports climbed to a record in the first half.

"Copper will have a difficult time because it's so highly correlated to Asian growth, especially China," said Charl Malan, who helps manage $2.3 billion at the Van Eck Global Hard Assets Fund in New York. Prices will struggle "for the next quarter," he said.

Copper futures for March delivery slid 5.35 cents, or 1.6 percent, to $3.3395 a pound on the Comex divison of the New York Mercantile Exchange. The metal gained 3 percent in the previous two sessions as the dollar eased.

Inventories monitored by the Shanghai Futures Exchange jumped more than sixfold last year, signaling consumption may trail the rate of imports. China accounts for 27 percent of global copper demand, according to Goldman Sachs Group Inc.

"We do not expect a continuation of high import levels" for refined and semi-finished products by China, said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland.

'Fair Price'

Malan of Van Eck said demand may rebound as manufacturing resumes in Asia after the Lunar New Year in February. A "fair price" for copper is $3.20 a pound, he said.

Declines were limited today after a report showed confidence among U.S. consumers rose in January to the highest level since September 2008. The U.S. is the second-biggest copper user.

Copper for delivery in three months fell 1.1 percent to $7,381 a metric ton ($3.35 a pound) on the London Metal Exchange.

Aluminum and lead prices also dropped in London. Nickel, tin and zinc climbed.