Copper Tumbles Most in Four Months as Economic Stimulus Ebbs

Jan. 27 (Bloomberg) -- Copper prices fell the most in four months on concern that China and the U.S., the world’s biggest metal users, will speed up plans to unwind economic-stimulus measures.

China has moved to restrict lending and cool economic growth, and the U.S. has called for limits on risk-taking by banks. Copper futures have doubled in the past year, partly because demand surged in China in the first half of 2009.

"China has been what propped up apparent demand for most metals," said Sean Corrigan, the chief investment strategist at Lausanne, Switzerland-based Diapason Commodities Management, which has about $6.5 billion in assets. Efforts to rein in growth are "definitely a challenge to the bull market," he said.

Copper futures for March delivery fell 11.7 cents, or 3.5 percent, to $3.225 a pound on the Comex division of the New York Mercantile Exchange, the biggest drop for a most-active contract since Sept. 24.

The metal extended its decline after a government report showed sales of new U.S. homes unexpectedly dropped in December. Builders are the biggest copper users.

"With China moving toward tightening borrowing, it may take a lot of consumption off the market," said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago.

Prices also fell as the dollar advanced against a basket of six major currencies, curbing demand for commodities as alternative investments.

Copper for delivery in three months declined $151, or 2 percent, to $7,230 a metric ton ($3.28 a pound) on the London Metal Exchange. Lead, tin, nickel, aluminum and zinc prices also dropped.