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Lead loses, Copper, Zinc Drop as China Credit Cooling May Hurt Metal Demand (Don't believe it)
By Bloomberg News - Nov 22, 2010 11:06 PM PT

Copper, zinc and aluminum declined as China increased steps to curb loans and cool inflation, curbing consumption in the world’s biggest user. Concern Europe’s debt problems may spread boosted the dollar versus the euro, hurting demand for commodities priced in the U.S. currency.

The three-month delivery contract on the London Metal Exchange dropped 1.8 percent to $8,140 a metric ton at 2:46 p.m. in Singapore. The metal for March delivery on the Shanghai Futures Exchange slumped 3.3 percent to 61,320 yuan ($9,222). Zinc for March delivery tumbled the 5 percent limit in Shanghai.

Copper “is facing resistance as physical demand isn’t so good in China.”, Cao Yanghui, an analyst at Yong’an Futures Co., said from Hangzhou. “Europe’s debt crisis helped the dollar and in turn weighed on copper.”

China’s biggest banks are close to reaching annual lending quotas and plan to stop expanding their loan books to avoid exceeding the limits, according to four people with knowledge of the matter. Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and Agricultural Bank of China Ltd. are only extending new loans as existing ones get repaid, the people said, speaking on condition of anonymity.

Moody’s Investors Service said it may lower Ireland’s credit rating by more than previously anticipated. A “multi- notch” downgrade to the country’s Aa2 rating was “most likely,” it said.

A bailout of the country’s banks may total as much as 95 billion euros ($130 billion), making Ireland vulnerable to a rerun of the Greek debt crisis that destabilized the euro earlier this year, Moody’s said.

Euro Weakens

The euro weakened versus 12 of its 16 most-active counterparts and declined for a second day against the dollar, dropping as much as 0.7 percent to $1.3527.

With little economic data expected this week, base metals may continue to track the dollar, while the Thanksgiving holiday in the U.S. may deter the market from taking any aggressive action, Leon Westgate, an analyst at Standard Bank Plc in London, said in a research note e-mailed today.

“A general feeling of uncertainty and a lack of momentum still dominates, with metals likely to continue reacting to headlines and other exogenous factors this week, rather than forging a path of their own,” he said.

Copper traded on Changjiang, Shanghai’s biggest nonferrous metals market, was quoted at 61,700 yuan to 61,800 yuan today, a discount of 100 yuan to 200 yuan to the front- month futures contract on the Shanghai Futures Exchange.

Consumer Demand

“Trading firms said demand from end consumers is not good, because winter is approaching,” Cao said.

Demand for metals typically increases in spring and autumn, and weakens in summer and winter as extreme weather conditions and holidays may force some plants to suspend operations.

Chinese imports will likely remain low through to the end of the year as the domestic market continues to trade at a large physical discount and exchange warehouse stocks expand to levels not seen since June, Barclays Capital said in a report yesterday. The implied destocking along the supply chain indicated imports may pick up in early 2011, it said.

Aluminum in London fell 1.3 percent to $2,259 a ton, zinc declined 1.7 percent to $2,101 a ton and lead lost 2.2 percent to $2,200 a ton. Nickel lost 1.5 percent to $21,271 a ton.

http://www.bloomberg.com/news/2010-11-23/copper-drops-in-london-and-shanghai-on-europe-debt-china-demand-concerns.html