June 16 (Bloomberg) -- Copper declined for a second day in London on concern about the stability of the global economy as China may extend credit tightening measures, Europe’s debt crisis remains unresolved and the U.S. shows signs of slowing.
Three-month copper on the London Metal Exchange fell as much as 1.1 percent to $9,058 a metric ton, and traded at $9,070 by 2:54 p.m. in Singapore. All six LME metals dropped as the Economic Information Daily said in a front-page editorial that an interest rate increase by China isn’t “far away”.
“Demand is not great but it is steady,” Ren An, an analyst at China International Futures Co., said from Wuxi. “We’ll have to see if that’s enough to withstand the pressures from the macro-economic environment, which is filled with uncertainty at the moment.”
China announced a half percentage point boost in the reserve requirement ratio for banks on June 14, adding to its 11 reserve-requirement and four interest-rate increases since early 2010 to cool inflation, which climbed to 5.5 percent in May, the fastest pace in almost three years.
Greek Prime Minister George Papandreou may be forced out of office amid escalating protests over budget cuts, as European Union failed to reach an agreement on a new bailout to prevent the first euro-area default, sparking a global rout in equities and sending the euro to a three-week low against the dollar.
In the U.S., industrial production trailed estimates and manufacturers in the New York region unexpectedly turned pessimistic in June. China and the U.S. are the world’s largest users of copper.
Aluminum prices in China have moved into so-called backwardation, where near-term supplies are more expensive than longer-dated contracts, a sign demand may be improving or supply may be tightening. Prices in Changjiang, Shanghai’s biggest cash market, traded around 17,070 yuan ($2,632) a ton today, while futures were at 16,975 yuan.
“Physical sellers are unwilling to let go below 17,000 yuan but it’s too soon to draw the conclusion that Chinese demand is so strong that the market is pricing in a shortage,” Zhang Yan, a trader at Jin Yuan Futures Co., said from Shanghai. “We’ll have to wait a few days to see if the backwardation persists as it could just have to do with the contract expiry.”
China’s output of aluminum products jumped 34 percent from a year ago to 2.45 million tons in May, the statistics bureau said on June 14. It climbed from 2.43 million tons in April.
Aluminum in London fell 1 percent to $2,565 a ton, zinc lost 0.6 percent to $2,232 a ton and lead shed 1.1 percent to $2,490.25 a ton. Nickel decreased 0.8 percent to $21,850 a ton and tin dropped 1.4 percent to $24,800 a ton.
--Editors: Ovais Subhani, Richard Dobson
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To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net