Copper Declines on Speculation China May Sell From Government Stockpiles

Sep 7 (Bloomberg)--

Copper dropped for the first time in five days, falling by the most in two weeks, on speculation China’s State Reserve Bureau may sell some of its stockpiles after prices rallied to the highest level in four months.

The three-month delivery contract lost as much as 1.4 percent, the biggest intraday drop since Aug. 25, to $7,601.25 a metric ton on the London Metal Exchange, and traded at $7,630 at 3:08 p.m. in Singapore. The commodity climbed to $7,750 Sept. 3, the highest level since April 27, after better-than-expected U.S. jobs data eased concerns the economic recovery was faltering.

"There is talk today that the SRB might sell copper, and while such rumors emerge from time to time, especially when prices rally strongly, it does hurt investor sentiment,” said Liu Biyuan, an analyst at GF Futures Co. “Copper is also lower because of the stronger dollar and weaker equities.”

China’s State Bureau of Material Reserve, also known as the State Reserve Bureau, operates under the National Development and Reform Commission, formulating strategy and managing state buying of mineral reserves. The bureau bought 235,000 tons of the metal last year, according to the China Nonferrous Metals Industry Association. When contacted, an official at the bureau, who did not wish to be identified, declined to comment.

"While it might make sense to sell now considering what they paid for it, the bureau isn’t out to profit from market moves,” said Wen Jinghai, an analyst at Bohai Futures Co. “If they really do sell part of the stockpile, it will only be a little at a time so as not to cause disruptions in the market.”

Shanghai Copper

Copper for December delivery on the Shanghai Futures Exchange dropped by as much as 1.7 percent to 59,500 yuan ($8,766) a ton, before ending the session at 59,680 yuan. The metal gained to 60,620 yuan yesterday, also the highest price since April 27.

Immediate-delivery copper in Changjiang, Shanghai’s biggest cash market, traded at about 59,580 yuan today, down 0.7 percent, the biggest drop in three weeks.

"Higher prices always make physical buyers shy away and the market loses an important area of support,” Guan Jianxiong, an analyst at Zhujiang Futures Co., said from Guangdong. “The uptrend remains intact as economic data improves,” Guan said by phone. Copper has surged 21 percent in the past year.

The dollar gained for a second day against a six-currency basket including the euro. It rose the most in a week against the 16-nation currency after the Association of German Banks said that the nation’s 10 largest lenders, including Deutsche Bank AG, may need about 105 billion euros ($134 billion) in fresh capital because of new regulations.

The MSCI Asia Pacific Index fell for the first day in five, and stocks in China declined after a government official said a slowdown in industrial output growth will deepen on real-estate and energy curbs and the outlook for exports.

Aluminum in London declined 0.2 percent to $2,187.75 a ton, zinc fell 0.8 percent to $2,179.50 a ton, and lead decreased 0.6 percent to $2,182 a ton. Nickel shed 1.1 percent to $21,900 a ton and tin was little changed at $20,900 a ton.