Copper Declines as China May Raise Interest Rates, Curbing Metal Demand

Copper fell in New York for the first time in five sessions on concern that China might raiseinterest rates further to fight inflation, potentially curbing metal demand.

Figures for Chinese imports and exports in March released yesterday beat estimates from analysts surveyed by Bloomberg News. The country’s central bank has increased borrowing costs four times since early October.

“Chinese data looks much stronger than expected,” said Bart Melek, an analyst at TD Securities in Toronto. “There is now a concern that good economic data is actually bad, as it will embolden China’s government to raise interest rates much higher.”

Copper futures for May delivery fell 4.15 cents, or 0.9 percent, to close at $4.46 a pound at 1:19 p.m. on the Comex in New York. The price gained 5.8 percent in the previous four sessions.

While China’s overseas trade increased overall, imports of copper and copper products by the world’s biggest metals user fell 33 percent from a year earlier, customs data showed.

Copper will “face near-term headwinds as higher oil prices potentially translate into a negative demand shock for the metals, and as these commodities are exposed to supply-chain problems resulting from the earthquakes in Japan,” Goldman Sachs Group Inc. said today in a report. Goldman is closing its long position in copper, or bets on higher prices, according to the report.

Copper for three-month delivery dropped $20, or 0.2 percent, to $9,855 a metric ton ($4.47 a pound) on the London Metal Exchange.

Aluminum also fell in London, while nickel, lead and zinc gained. Tin for three-month delivery on the LME rose 0.8 percent to $33,300 a ton, after reaching a record $33,600.

(Source: http://www.bloomberg.com/news/2011-04-11/copper-erases-gain-as-chinese-imports-stoke-speculation-demand-may-weaken.html)