Farallon Resources Ltd. (fka FRLIF)

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Zinc falls, Copper Drops on Concern China May Take More Steps to Slow Economic Growth
By Maria Kolesnikova - Nov 16, 2010 5:30 AM PT

Copper fell in New York and London on concern that China, the world’s biggest consumer of the metal, may take further steps to cool economic growth, damping demand for commodities.

China is under “pressure” from capital inflows, central- bank Governor Zhou Xiaochuan said as a state newspaper reported that price controls may be imposed to cool the fastest inflation in two years. The country’s benchmark money-market rate yesterday rose to a one-week high. Chinese stocks fell today, driving the benchmark index to a one-month low.

“Copper is down again this morning after Chinese equities took another pounding as the potential for Chinese monetary- policy tightening continued to weigh on investors and conspired to drag prices lower,” Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe Ltd. in London, said in a report.

Copper for delivery in March dropped 7.45 cents, or 1.9 percent, to $3.85 a pound at 8:16 a.m. on the Comex in New York. Copper for delivery in three months declined 2.2 percent to $8,459 a metric ton on the London Metal Exchange. All of the six main metals traded on the LME slid, led by zinc.

LME copper may return to $8,000 a ton after the recent rally to a record, William Adams, an analyst at Basemetals.com in London, said by telephone. Copper rose to an all-time high of $8,966 on Nov. 11.

Swifter Inflation

“Markets will remain nervous until we see what kind of response China comes up with,” Adams said.

Chinese inflation sped up to a two-year high in October, figures showed on Nov. 11, stoking speculation that the central bank may further tighten monetary policy as the economy maintains momentum. Interest rates will rise again before year- end after an increase in October that was the first since 2007, according to a Bloomberg News survey of economists.

“Inflationary pressures have been building, and further rate hikes are due,” RBC’s Heath said. China will raise borrowing costs “very soon” to tackle inflation, Andy Xie, an independent economist, said in a Bloomberg Television interview in Hong Kong.

Figures due at 9:15 a.m. New York time today probably will show that industrial production in the U.S., the second-largest copper consumer, expanded in October, according to a Bloomberg News survey of 78 economists. Output gained 0.3 percent, the survey’s median estimate shows.

Copper Premium

“Economic data in the U.S. tends to be better lately, so that will just add to the volatility in the market,” said Adams of Basemetals.com.

Immediate-delivery LME copper’s premium to the three-month contract was last unchanged at $25 a ton after almost doubling yesterday. Prices moved on Nov. 8 to a so-called backwardation, when nearby metal trades above longer-dated contracts, potentially indicating concern about near-term supply.

Workers at Anglo American Plc and Xstrata Plc’s Collahuasi copper mine in northern Chile will lower their wage demands in government-mediated talks to end an 11-day strike if the company increases its proposal, union leader Manuel Munoz said in an interview with Bloomberg News yesterday.

Tin for three-month delivery on the LME dropped 2.5 percent to $25,250 a ton. Prices reached a record $27,500 on Nov. 9. The metal has jumped 49 percent this year, leading advances on the exchange, after production was disrupted in Indonesia and the Democratic Republic of Congo.

Aluminum slid 2.1 percent to $2,350 a ton and nickel declined 0.9 percent to $22,147 a ton. Lead dropped 2.5 percent to $2,393 a ton and zinc fell 3.4 percent to $2,258 a ton.

http://www.bloomberg.com/news/2010-11-16/copper-drops-on-concern-china-may-take-more-steps-to-slow-economic-growth.html