Copper in London Declines on Ample China Supplies, Tight Credit

Dec. 24 （Bloomberg） -- Copper in London declined amid subdued pre-holiday trade and as tightened credit in China and ample supplies damped the demand outlook in the world's largest consumer. Aluminum gained.

The metal for three-month delivery dropped as much as 0.7 percent to $9,235 a metric ton on the London Metal Exchange and traded at $9,250 by 10:53 a.m. in Shanghai, or 1.5 percent less than the record $9,392 reached Dec. 21. Copper, used in wiring and construction, is poised for a fourth weekly gain. The bourse will be closed on Dec. 27 and Dec. 28.

"In China, tight credit at the end of the year and ample physical supplies have made market participants cautious, and prevented investment inflows," said Wang Na, an analyst at Guolian Futures Co. "Trading is very slow given the holidays and after prices hit a record earlier this week."

China's central bank raised benchmark lending and deposit rates in October, the first increase since 2007, and raised commercial lenders' required reserve ratio three times since November to fight inflation. The consumer price index grew by 5.1 percent last month, the fastest pace in 28 months.

Production of refined copper in China jumped to a record of 443,000 tons last month, according to the National Bureau of Statistics. Stockpiles at Shanghai Futures Exchange warehouses expanded to the highest level in six months last week.

'Losing Steam'

"Copper seems to be losing steam for now, even though there is positive news around," Wang said.

Household purchases in the U.S. rose 0.4 percent after a 0.7 percent increase in October that was almost twice as large as previously estimated, figures from the Commerce Department showed yesterday. First-time filings for jobless insurance declined by 3,000 to 420,000 in the week ended Dec. 18, matching the median forecast in a Bloomberg News survey, according to Labor Department figures.

In Chile, the port at Anglo American Plc and Xstrata Plc's Collahuasi venture, the world's third-largest copper mine, may remain closed for "a couple of months" after a Dec. 18 accident, Miguel Angel Duran, Anglo's head of Chilean operations, told reporters in Santiago yesterday.

Copper for March delivery on the Shanghai exchange fell as much as 1.1 percent to 67,880 yuan （$10,231）, and traded at 68,180 yuan a ton at 11:02 a.m. local time. The contract is poised for its first weekly drop in four.

London Metal Exchange data showed yesterday copper inventories rose for a ninth straight day, reaching the highest level since Oct. 29, signaling slowing demand.

The Shanghai bourse said yesterday it will allow copper and aluminum at bonded warehouses to be delivered against futures contracts, a move expected to facilitate physical flows and bring Shanghai prices closer to international market levels. Two warehouses at Yangshan port in Shanghai will provide delivery services from March 16 next year.

Three-month aluminum in London climbed 0.4 percent to $2,442.25 a ton, zinc was little changed at $2,297 a ton, and lead fell 0.4 percent to $2,440 a ton. Nickel gained 0.9 percent to $23,801 a ton, and tin dropped 0.7 percent to $26,700.

--Helen Sun, with assistance from Matt Craze in Santiago. Editors: Richard Dobson, Jake Lloyd-Smith