Farallon Resources Ltd. (fka FRLIF)

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Zinc gains, Copper Declines in London as China's Economic Growth Slows: LME Preview
By Glenys Sim - Oct 21, 2010 1:03 AM PT

Oct. 18 (Bloomberg) -- Gavin Wendt, a director at Mine Life Resources Ltd. in Sydney, talks about his investment strategy for gold, copper and crude oil. Wendt also discusses BHP Billiton Ltd. and Rio Tinto Group abandoning a plan to create the world’s largest iron-ore exporter after opposition from regulators in Europe and Asia. He speaks to Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Copper dropped as China’s economy grew at the slowest pace in a year in the third quarter and the dollar rebounded. Zinc gained to a six-month high.

The metal for three-month delivery fell as much as 0.8 percent to $8,272.50 a metric ton, and traded at $8,305 a ton at 3:35 p.m. in Singapore. Copper rebounded from a one-week low yesterday as the dollar slumped by the most in three-and-a-half months against a six-currency basket. It reached a 27-month high of $8,492 a ton on Oct. 19.

Economic growth in China, the largest metals user, was 9.6 percent in the third quarter, the statistics bureau said today, the smallest gain in a year. Consumer prices rose 3.6 percent, matching the median forecast of economists surveyed by Bloomberg.

“China’s economic data didn’t surprise anyone and investors are just taking the opportunity to take profit,” Lin Ling, an analyst at Industrial Futures Co., said from Shanghai. “The world is still awash with liquidity and that’s going to keep driving prices higher as investors look for places to put their money.”

China’s interest rate increase two days ago, the first since 2007, highlighted the government’s confidence in the nation’s recovery and concern at asset-bubble and inflation risks. The rate hike may not curb gains in metal prices, and is unlikely to restrain demand, traders and analysts said yesterday.

December-delivery copper on the Comex in New York lost as much as 0.7 percent to $3.7665 a pound, while the metal for January delivery in Shanghai was little changed at 62,690 yuan ($9,433) a ton, after rising as much as 0.8 percent earlier.

‘Temporary Pullbacks’

“After the steep rally, commodities are vulnerable for temporary pullbacks,” Tobias Merath, head of commodity research at Credit Suisse AG, wrote in a note yesterday. The bank expects copper to trade between $8,400 and $8,600 at the end of the year, up from an earlier estimate of $7,800-$8,000. It also increased its end-2011 forecast to $8,800-$8,900 from $8,500-$8,700 a ton.

Copper, used in construction and household appliances, is up 8 percent in the past month as the Dollar Index declined 4 percent against six major currencies including the euro and yen. The dollar fell against the euro before a report forecast to show a gauge of leading indicators failed to accelerate last month.

The dollar has come under “significant pressure” as markets expect the Federal Reserve to resume asset purchases and “this environment is directing strong investment flows into commodity markets,” said Merath.

Copper demand exceeded supply by 161,000 tons in the first eight months of the year, compared with a surplus of 16,000 tons a year earlier, the World Bureau of Metal Statistics said yesterday. Stockpiles tallied by the London Metal Exchange have fallen 26 percent this year.

Zinc Gains

Zinc gained as much as 1.2 percent to $2,468 a ton, the highest price since April, on speculation Shenzhen Zhongjin Lingnan Nonfemet Co., China’s third-largest producer of the metal, halted production at its smelter in Guangdong province. Trading of Zhongjin shares was suspended today pending a company announcement.

“There is talk that the company has stopped production at its Shaoguan smelter because of an environmental issue and about 250,000 tons of capacity has been affected,” said Huang Jianyun, an analyst at Maike Futures Co.

Aluminum in London fell 0.3 percent to $2,354 a ton, lead climbed 0.6 percent to $2,464.50 a ton, and nickel lost 0.6 percent to $23,800 a ton. Tin gained 0.3 percent to $26,825 a ton at 3:39 p.m. in Singapore.

http://www.bloomberg.com/news/2010-10-21/copper-in-london-declines-as-china-economic-growth-slows-dollar-rebounds.html