Copper Falls Most in Three Weeks on China Interest-Rate Outlook

Copper fell to a two-week low in New York on signs that China, the world’s biggest buyer of industrial metals, may take more steps to restrain the economy and cool inflation.

China’s manufacturing expanded in March from February, a report showed today. The central bank will boost interest rates again this quarter, according to all 20 economists in a Bloomberg survey on March 22. Copper futures in New York fell for the sixth time in seven sessions.

The market is “caught by fears of the Chinese government further tightening its monetary policies,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “That will put a cap on copper prices.”

Copper futures for May delivery fell 4.9 cents, or 1.1 percent, to close at $4.2585 a pound at 1:16 p.m. on the Comex in New York. Earlier, the price touched $4.212, the lowest for a most-active contract since March 17.

China has boosted rates three times since mid-October. Imports of refined copper slid to a two-year low in February, figures showed last week. Inventories monitored by the Shanghai Futures Exchange have jumped 23 percent this year.

Copper may drop to $3.95 in 10 days if the price falls below $4.21, McGhee said. In the first quarter, the metal declined 3.1 percent after climbing to a record of $4.6575 on Feb. 15. The metal is down 3.6 percent for the week.

On the London Metal Exchange, copper for delivery in three months dropped $68, or 0.7 percent, to $9,360 a metric ton ($4.25 a pound). Aluminum, tin, and nickel also declined. Lead and zinc rose.

(Source: http://www.bloomberg.com/news/2011-04-01/copper-falls-most-in-three-weeks-on-china-interest-rate-outlook.html)