Copper Drops as Prices, China-Tightening Concern Deter Buyers

Feb. 16 (Bloomberg) --Copper fell for a second day on concern that record prices and the prospect of more tightening measures by China, the largest user, may hurt demand. Lead and nickel also declined.

Three-month delivery copper on the London Metal Exchange lost as much as 1.3 percent to $9,886 a metric ton and was at $9,959 by 3:06 p.m. Shanghai time. The price climbed to a record $10,190 a ton yesterday before closing 1.5 percent lower.

"We need to wait and see whether China will return to the market in March and April amid record prices,” Wang Mingyi, an analyst at Galaxy Futures Co., said from Beijing. "This is even more important than the general U.S. and China economic data.”

In the U.S., sales at retailers rose 0.3 percent last month, the Commerce Department said yesterday. That’s less than the 0.5 percent median forecast in a Bloomberg News survey of economists. The December gain was revised to 0.5 percent from 0.6 percent.

China’s consumer price index gained 4.9 percent in January from a year earlier, according to the National Bureau of Statistics. That compares with a 4.6 percent rise in December and a median forecast of 5.4 percent in a Bloomberg News survey.

Economists, including Liu Li-gang of Australia & New Zealand Banking Group, expect more monetary tightening after the People’s Bank of China raised interest rates last week for the third time in four months.

Copper for May delivery on the Shanghai Futures Exchange closed 0.6 percent lower at 75,660 yuan ($11,490) a ton.

High Price

"It may take some time for local end users to get used to the high price, and before that they’ll probably choose to rely on their stockpiles,” said Wang Jingjing, an analyst at Founder Futures Co. "Coupled with the expectations of more tightening, it remains to be seen how the demand side will perform.”

BHP Billiton Ltd., the world’s largest mining company, today reported record first-half profit of $10.5 billion and committed to spending $80 billion to expand and develop copper, iron ore, oil and coal projects. Among plans, BHP is studying an expansion of Olympic Dam in Australia that would transform the mine into the world’s fourth-largest copper and gold operation.

Tongling Nonferrous Metals Group Co. agreed to a 54.8 percent increase in treatment-and-refining charges with BHP for processing copper concentrate in the first half, the smelter said in an exchange filing.

Tongling agreed $72 per ton for treatment fees and $7.20 per pound for refining fees with the Australian company on Jan. 20. That compares with $46.50 and $4.65 for 2010, China’s second-largest copper smelter said.

"The miners have bargaining chips, given the tight market,” said Yang Changhua, a senior copper analyst at metals researcher Beijing Antaike Information Development Co. The copper price increase to a record didn’t help alleviate the burden of smelters much, Yang said.

Lead lost 0.9 percent to $2,612 a ton, and nickel declined 0.4 percent to $28,640 a ton. Tin, which reached a record $32,799 on Feb. 15, declined 0.3 percent to $32,400. Zinc rose 0.8 percent to $2,510.50 a ton, while aluminum was little changed at $2,503 a ton.