Copper Falls in New York as China's Equities Enter Bear Market

LONDON, Aug. 20 -- Copper declined in New York and London after equities in China, the world's largest user of the metal, slipped into a so-called bear market, heightening speculation about weaker demand.

    The Shanghai Composite Index fell as much as 5.1 percent and declined 20.5 percent from this year's high in August. Copper climbed 94 percent this year as China rolled out a 4 trillion-yuan ($585 billion) stimulus before new bank loans fell in July.

    "The Chinese had a massive stimulus package and now there are signs of credit tightening up again," Andy Davidson, an analyst at Numis Securities Ltd. in London, said by phone. "The Chinese are very price sensitive and there are signs that demand is starting to come off."

    Copper for December delivery declined 8.15 cents, or 2.9 percent, to $2.693 a pound by 8:19 a.m. on the New York Mercantile Exchange's Comex division. Earlier it fell as much as 3.2 percent to $2.6855, the lowest intraday price since Aug. 3.

    Copper for three-month delivery fell $190, or 3.1 percent, to $5,891.5 a metric ton on the London Metal Exchange.

    China's July imports of copper shrank 15 percent from a month earlier, according to the Beijing-based customs office.

    "A significant slowdown in China's commodity demand still pose risks to the price recovery," Gayle Berry, an analyst at Barclays Capital in London, said in a report.

    Spot premiums, the fee paid on top of the cost of metal for immediate delivery, "are moving higher in Europe and the U.S. as physical demand is starting to improve," Berry said.

    Copper Forecasts

    Barclays raised its forecast for copper for immediate delivery to $5,140 a ton in 2009, up from $4,778 previously. In 2010, copper is expected to average $6,438, up from a previous forecast of $6,250.

    In Chile, an avalanche hit an expansion site at the Andina mine owned by Codelco, the world's largest copper producer. Production wasn't affected, a spokeswoman for Codelco's press office said yesterday.

    Copper supply is forecast to outpace demand by 245,000 tons this year, compared with an earlier estimate of 441,000 tons, London-based researcher GFMS Ltd. said in a report today.

    Among other LME metals for three-month delivery, zinc fell 1.2 percent to $1,773 a ton and lead decreased 1.4 percent to $1,787 a ton. Both zinc and lead supply outpaced demand in June, the International Lead & Zinc Study Group said.

    Aluminum fell 3.8 percent to $1,928 a ton, tin dropped 2.5 percent to $13,501 a ton. Nickel was 0.8 percent lower at $18,650 a ton.

    (Source: Bloomberg)