Copper Drops, Heads for First Weekly Fall in Three, on China Rates Concern

Copper fell, heading for its first weekly drop in three on concern that China, the top metals user, will step up monetary tightening after data showed that manufacturing accelerated for the first time in four months.

Three-month-delivery copper on the London Metal Exchange fell as much as 0.4 percent to $9,389 a metric ton, and traded at $9,404 at 1:58 p.m. in Singapore. All six LME base metals fell, led by a 0.9 percent drop in nickel.

The Purchasing Managers’ Index rose to 53.4 in March, compared with 52.2 in February and a median forecast of 54 in a Bloomberg News survey, easing concern that monetary tightening may hamper growth. A reading of more than 50 indicates expansion.

“The data is a double-edged sword,” Yan Lei, an analyst at Guoyuan Securities Co., said fromShanghai. “It shows the economy is still growing and at the same time it reminds investors about China’s tightening policy. It’s a good excuse to take some money off the table ahead of the holidays.” China’s markets are closed April 4 and 5 for the Qingming Festival.

Copper futures on the Comex in New York dropped 0.7 percent to $4.2775 a pound, while the metal for June delivery on the Shanghai Futures Exchange fell 0.2 percent to 70,500 yuan ($10,770) a ton.

The central bank has boosted banks’ reserve-requirement ratio eight times and raised interest rates three times since the start of 2010 to cool the economy and tame inflation. The People’s Bank of China may raise interest rates again early this month, Citigroup Inc. said.

China is “not even close” to being in the middle of a “massive infrastructure and investment build,” London Metal Exchange Chief Executive Officer Martin Abbott said in an interview yesterday. The bourse’s business will be “good” this year with China still in expansion, he said.

“China may grow at a slower pace but there will still be growth and this will keep demand for metals robust,” Zhang Yan, a trader at Jin Yuan Futures Co., said from Shanghai.

Nickel in London dropped 1.3 percent to $25,750 per ton, zinc lost 1 percent to $2,338.25 a ton and aluminum declined 0.6 percent to $2,631 a ton. Tin fell 1.9 percent to $31,210 a ton and lead lost 0.4 percent to $2,685 a ton.

(Source: http://www.bloomberg.com/news/2011-04-01/copper-advances-as-manufacturing-data-highlights-sustained-chinese-demand.html)