Copper May Drop as Earthquake Hits Japan, Causing Equity Markets to Slump

Copper may fall in New York for the first time in five days after an earthquake hit Japan, causing equities to slump.

The 6.6-magnitude quake hit the Tohoku region, the U.S. Geological Survey said today, the latest aftershock to strike Japan following the March 11 disaster that killed more than 27,300 people and caused radiation leaks at the Fukushima Dai- Ichi nuclear plant. The Stoxx Europe 600 Index of shares declined, and futures on U.S. benchmarks pared advances.

“Equity markets and futures came off a bit, so copper came down in sympathy,” said Andrew Silver, a Natixis Commodity Markets Ltd. trader in London.

Copper for May delivery dropped 1.1 cents, or 0.2 percent, to $4.4905 a pound at 8:28 a.m. on the Comex in New York. Prices had climbed as much as 0.7 percent to $4.533, the highest level since March 4. Copper for three-month delivery slipped 0.1 percent to $9,861.50 a metric ton on the London Metal Exchange, while tin advanced to a record.

Copper also erased gains as figures showed lower imports of the metal into China compared with 2010, fueling concern that demand may weaken in the world’s biggest consumer. Imports fell 33 percent from a year earlier to 304,299 tons in March while climbing 29 percent from the prior month, according to customs figures issued yesterday.

Too Much Copper

“The on-month increase adds to the oversupply, while the on-year decrease raises demand concerns,” Zhao Kai, an analyst at Jinrui Futures Co., said from Shenzhen. “The fundamentals in China aren’t looking strong at the moment.”

A government report this week may show China’s consumer price index increased 5.2 percent last month, exceeding the government’s 2011 target of 4 percent for the third month, according to economists surveyed by Bloomberg News. Data this week may also show inflation is accelerating in the U.S. Some investors buy commodities as a hedge against rising prices.

“We remain positive toward the outlook for metals this year, despite the recent spate of heightened volatility,” Morgan Stanley analysts led by Hussein Allidina said in a report today.

Still, hedge-fund managers and other large speculators decreased their net-long position in New York copper futures in the week ended April 5, the U.S. Commodity Futures Trading Commission said April 8. Net-long positions, or bets on higher prices, fell by 4,660 contracts, or 17 percent, from a week earlier, the CFTC said.

Tin for three-month delivery on the LME rose 0.8 percent to $33,300 a ton after reaching $33,600.

Aluminum, nickel and zinc also dropped on the LME. Lead gained.

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