Farallon Resources Ltd. (fka FRLIF)

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Zinc dips, Copper Slides on Concern China's Cooling Property Market May Curb Demand
By Anna Stablum - Aug 10, 2010 5:10 AM PT

Copper fell to a one-week low in New York and London after reports showed slower gains in real-estate prices in China, the world’s largest consumer of the metal.

The Shanghai Composite Index of equities slid the most in six weeks amid concern the government’s lending and property restrictions are curbing demand. Copper also dropped as the dollar strengthened, eroding demand for metals as an alternative investment. Still, imports of copper into China climbed for the first time in four months.

“At the macro level, July’s trade data confirmed that activity in the trade sector is cooling,” Daniel Major, an analyst at RBS Global Banking & Markets in London, said by phone. “But from a commodity perspective, copper-import numbers were supportive.”

Futures for September delivery slid 6.75 cents, or 2 percent, to $3.2865 a pound at 7:57 a.m. on the Comex in New York. The most-active contract reached $3.277, the lowest intraday price since July 30. Copper for delivery in three months fell 2.3 percent to $7,254 a metric ton on the London Metal Exchange.

Property prices in 70 major Chinese cities climbed 10.3 percent from a year earlier in July, the slowest pace for six months, a report showed. Construction accounts for a quarter of copper demand, according to the Copper Development Association.

Arbitrage Trades

Shipments of copper and products into China advanced 4.5 percent to 342,901 tons in July from June, the customs office said. They were down 16 percent from a year earlier, according to Bloomberg calculations.

Imports had been supported by so-called arbitrage trading, in which merchants bought metal in London and sold it in Shanghai to take advantage of the price differential between the markets.

“Despite some evidence of arbitrage trading, real copper demand in China has remained relatively robust during the seasonally weak summer months, despite fears of a sharp slowdown in demand from the construction sector,” RBS’s Major said.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, added as much as 0.6 percent. A stronger dollar makes metals priced in the currency more expensive in terms of other monies.

Inventories Decline

Copper stockpiles tracked by the LME shrank for a fifth day to 408,375 tons, the lowest level since Nov. 16, according to daily exchange figures. They slid 8.3 percent in July, the most since June 2009, and are down 19 percent this year, on course for the first annual drop since 2004.

Canceled warrants, or orders to draw metal from stockpiles, fell for a fifth session to 22,875 tons.

Tin for three-month delivery on the LME fell 3.2 percent to $20,625 a ton. The metal, mainly used in electrical soldering, yesterday climbed as high as $21,500, the highest intraday price since Aug. 22, 2008.

“We continue to view tin as having among the tightest fundamental outlooks of all the base metals,” Leon Westgate, an analyst at Standard Bank Plc, said in a report e-mailed yesterday. “The uptrend that has been in place since the first quarter 2009 remains intact and should continue through 2011, with no signs that fundamental tightness will ease in the foreseeable future.”

Inventories in LME-monitored warehouses rose 0.6 percent today to 14,990 tons, paring this year’s decline to 44 percent. A single party holds between 40 percent and 49 percent of stockpiled LME tin, according to exchange data as of Aug. 6. That was down from between 50 percent and 79 percent in the prior session.

Nickel fell 2.6 percent to $22,198 a ton and aluminum slid 1.4 percent to $2,152 a ton. Zinc dropped 2.6 percent to $2,094 a ton and lead fell 3.2 percent to $2,130 a ton.

http://www.bloomberg.com/news/2010-08-10/copper-slides-on-concern-china-s-cooling-property-market-may-curb-demand.html