Copper May Drop on China Credit-Tightening Concern, Survey Shows

Copper may fall on concern demand will weaken as China, the world’s biggest consumer of the metal, tightens credit to restrain inflation, a survey showed.

Twelve of 20 analysts, investors and traders surveyed by Bloomberg, or 60 percent, said prices will drop next week. Five predicted a gain and three expected little change. Copper for delivery in three months was down 4.3 percent for this week at $9,447 a metric ton at 4 p.m. yesterday on the London Metal Exchange.

China is likely to raise the reserve requirement ratio for banks in the “near future,” the China Securities Journal said yesterday. Figures due today will show consumer prices in the country climbed 5.2 percent from a year earlier in March, according to the median estimate from economists surveyed by Bloomberg News. The government has a 4 percent target for 2011.

Copper “will probably trend downward next week as we get closer to further tightening measures in China,” said Charles Cooper, an analyst at Oriel Securities Ltd. in London. “We’ve got Chinese stats out. On the back of that, we will probably see expectations of lower base-metals prices.”

The Asian country has increased the ratio three times this year to help curb inflation. China’s central bank has raised interest rates four times since mid-October.

The red bars on the attached chart are derived by subtracting bearish forecasts from bullish estimates, with readings below zero signaling the majority of respondents expect a decline. The green line shows the copper price. The survey data shown are as of April 8.

The weekly copper survey has forecast prices accurately in 63 of the past 132 weeks, or 48 percent of the time.

This week’s survey results: Bearish: 12 Bullish: 5 Hold: 3

(Source: http://www.bloomberg.com/news/2011-04-14/copper-may-drop-on-china-credit-tightening-concern-survey-shows.html)