Copper Rally Halts as Stockpiles Gain, Consumer Credit Falls

LONDON, Sept. 10 -- Copper fell, halting a four-session rally, after inventories rose and a larger-than-estimated plunge in U.S. consumer borrowing cast doubt on the strength of the economic recovery.

    Stockpiles of copper monitored by the London Metal Exchange rose 0.4 percent today to the highest since May. Consumer credit fell for a sixth month in the U.S., the longest decline since 1991, as banks curbed lending. The record $21.6 billion drop in borrowing, reported yesterday by the Federal Reserve, was more than five times larger than economists forecast in a Bloomberg News survey.

    "The consumer is very cautious, traumatized both by imploding equity and housing prices, as well as legitimate fears about losing employment," Edward Meir, a metals analyst at MF Global Ltd., wrote today in a report. He predicted a "modest" decline in metals prices this month and next.

    Copper futures for December delivery fell 3.2 cents, or 1.1 percent, to $2.924 a pound on the New York Mercantile Exchange's Comex division. On the LME, copper for three-month delivery slid 0.9 percent to $6,415 a metric ton ($2.91 a pound).

    "If trade fails to push over $2.99 a pound in short order, look for prices to pull back and test $2.90 support," Ralph Preston, a Heritage West Futures Inc. analyst in San Diego, said by e-mail. "The copper market is bullish and a close over $2.99 should ignite a rally to test $3.13 weekly resistance."

    China Demand

    Copper has more than doubled this year, helped by record first-half imports by China, the world's largest user of the metal. The LME Index of six metals is up 72 percent this year. Shipments of refined copper to China dropped 23 percent in July from June, when imports reached a record.

    "Upward momentum in prices will be difficult to maintain in the face of an expected fall off in Chinese metals import volumes," Frederic Lasserre, head of commodities research at Societe Generale SA in Paris, wrote today in a report.

    Copper may average $5,900 a ton next year in London, up from $4,571 this year through today, on "steady" demand, MF Global's Meir said.

    Among other LME metals, lead fell 2 percent, after touching $2,517.25 yesterday, the highest price since May 7, 2008. Used mainly in batteries, lead has more than doubled this year, leading the six members of the LME index, partly on concern that output capacity may fall in China. Smelters have been shut for environmental reasons and after at least three recent incidents involving lead poisoning in children.

    Plants capable of producing at least 500,000 tons of lead a year are being probed, according to Standard Chartered Plc. The country produces about 4 million tons of lead a year, almost half of the world's output of 8.5 million tons, the bank said.

    Tin for delivery in three months fell 1.2 percent on the LME. Aluminum also sank, while nickel and zinc were unchanged.

    (Source: Bloomberg)