Mar 14, 2012 NEW YORK (Dow Jones)--Copper futures slumped 1.4% Wednesday after China, the world's largest consumer of the industrial metal, signaled it would keep firm controls over its property sector.
Copper is widely used in construction for electrical wiring and plumbing, and China's red-hot real-estate sector has been a key source of demand for the metal.
Copper for May delivery, the most-active contract, fell 5.45 cents, or 1.4%, to settle at $3.8480 a pound on the Comex division of the New York Mercantile Exchange. Copper's declines Wednesday erased the previous day's gains, which came on the back of the Federal Reserve's upbeat outlook on the U.S. economy.
"The macro picture remains cloudy, and although recent economic data has been mildly positive, more evidence from the U.S. is needed to convince the global trading community that the green shoots of recovery stand a real chance of flowering," said traders at Sucden Financial.
Early Wednesday, Chinese Premier Wen Jiabao said real-estate prices are still far from reasonable levels and loosening policy controls permanently could hurt the domestic economy. Beijing has clamped down on property speculators by, among other measures, limiting who can purchase second homes in large cities like Shanghai.
"Although the rhetoric was not particularly new, it did reinforce perceptions that easier lending conditions in the red-hot property market were likely not going to materialize any time soon," Edward Meir, senior commodity analyst with INTL FCStone, said in a note.
He added that recent reports from Chinese sources suggest that business conditions for copper fabricators continue to stagnate. "The largest appliance maker in Guangdong province is running at 50% of capacity, and reportedly will be laying off some 32,000 people," he said. "Other tube processors we are in touch with report that demand is off some 40% since Christmas alone. With a backdrop like this, it is hard to get too excited about copper's upside prospects, the recent uptick notwithstanding."
Copper settlements (ranges include electronic and pit trading):
Mar $3.8420; down 5.45 cents; Range $3.8350-$3.9105
May $3.8480; down 5.45 cents; Range $3.8335-$3.9180