Jun 22, 2010 (Bloomberg) - Copper and zinc dropped in Shanghai after China said it will remove export-tax rebates on some products, stoking concern that a domestic supply glut will form.
Copper for September delivery in Shanghai fell as much as 1 percent to 52,340 yuan ($7,680) a ton and traded at 52,460 yuan at 9:21 a.m. local time. Zinc slumped as much as 2 percent to 14,515 yuan a ton and last traded at 14,625 yuan.
Rebates on some copper, zinc, lead, nickel and tin products such as tubes and wires will be removed from July 15, the Ministry of Finance said in a statement yesterday on its website. The tariff change, announced amid increasing trade complaints from the U.S. and the European Union, will also affect steel products, of which China is the largest producer.
"The rebate removal puts immediate pressure on Chinese prices,"Xiao Jing, an analyst at Beijing Capital Futures Co., said today. Copper and zinc may be the most prone to the negative impact as exports of the metals products just started to recover, she said.
Three-month delivery copper dropped as much as 1.1 percent to $6,538 a ton on the London Metal Exchange, before trading at $6,556.
U.S. sales previously owned homes unexpectedly fell in May as demand began to slip even before a government tax credit expires, figures from the National Association of Realtors showed yesterday in Washington. The U.S. is the second-biggest copper user.
Aluminum in London retreated 0.2 percent to $1,955 a ton, zinc lost 0.8 percent to $1,779 a ton, lead declined 1 percent to $1,810. Nickel and tin were yet to trade as of 9:21 a.m. in Shanghai.