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Copper Falls as Supply Concern Eases After Chile Mines Reopen
Mar 2,2010 16:51CST
industry news

March 2 (Bloomberg) -- Copper extended a fall from the highest in more than five weeks in London as mines reopened in Chile following the Feb. 27 earthquake and the dollar rebounded, reducing the investment appeal of raw materials.

Copper for three-month delivery on the London Metal Exchange declined as much as 1.7 percent to $7,275 a metric ton, after gaining as much as 5.6 percent yesterday to the highest since Jan. 20. The contract traded at $7,280 a ton at 3:07 p.m. in Shanghai. The June-delivery contract on the Shanghai Futures Exchange fell as much as 2.7 percent to 59,120 yuan ($8,659) a ton, and closed at 59,170 yuan.

The metal surged yesterday on concerns a magnitude-8.8 quake disrupted supplies from Chile. It narrowed gains as Codelco, the world's largest producer, said it reopened mines and would meet supply contracts. The dollar rose on growth in U.S. consumer spending.

"The impact of the Chile quake proved to be short-lived as its real consequence on supplies appears to be very limited," Ge Jun, an analyst at Changjiang Securities Co., said from Wuhan, Hubei province today.

Exit from stimulus plans by governments and gains in the dollar may constrain copper's climb in the near term, Ge added.

Australia's central bank resumed raising interest rates after a one-meeting pause, judging that the economy is strong enough to withstand global sovereign debt risks. The dollar rose for a second day against a basket of six major currencies, adding 0.3 percent to 80.964 by 2:51 p.m. in Shanghai.

Lagging Demand

Copper slid in Shanghai, after jumping by the limit yesterday, also on signs of demand lagging behind supplies in the country's cash market. Spot copper prices turned lower than futures several weeks ago, with the gap widening to 600 yuan a ton today, according to Jinrui Futures Co.

"Price gains were overdone and are bound to come down," given that Codelco reopened mines and others in the north remained intact, Che Weiyuan, a trader at Dayue Futures Co. said from Shaoxing, Zhejiang province today.

China's manufacturing grew at a slower pace in February, as shown by a Purchasing Managers' Index released by the government yesterday. The country is the world's largest consumer of copper used in homes and power grids.

Aluminum in London was 1.1 percent down at $2,120 a ton, zinc slumped 2 percent to $2,176, lead decreased 0.9 percent to $2,150, nickel retreated 1.4 percent to $21,150, and tin fell 0.6 percent to $16,950.

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