Bloomberg News

Copper Drops on China Demand Worries Amid Falling Home Prices

February 02, 2012

Feb. 2 (Bloomberg) -- Copper declined amid concern that Chinese demand may decline as home prices in the world’s largest user continued to slide and the possibility of a hard landing this year for the country’s economy persisted.

The metal for delivery in three months lost as much as 0.8 percent to $8,370 a metric ton on the London Metal Exchange and traded at $8,425 by 3 p.m. Shanghai time. March-delivery copper dropped 0.3 percent to $3.8295 per pound on the Comex.

Home prices in China fell for a fifth month in January, declining 0.18 percent from December, SouFun Holdings Ltd., the nation’s biggest real-estate website owner, said yesterday. That was the longest losing streak since the company started tracking the data in July 2010. Real prices could drop as much as 15 percent, said Sonny Kalsi, a founder of GreenOak Real Estate and former global co-head of property at Morgan Stanley.

“The property sector, directly and indirectly, accounts for about half of the copper use, so if the situation worsens, it could be a really serious risk to the demand side,” Li Peng, an analyst at Guotai Junan Futures Co., said by phone from Shanghai. “Last year, social housing construction offered support to demand, but I’m worried about this year.”

China’s economy is headed for a hard landing this year as weaker demand overseas chokes off exports, said Gary Shilling, president of A. Gary Shilling & Co., who correctly forecast the U.S. recession that began in December 2007. Investors should bet on declines in Chinese stocks and commodities to hedge against such an outcome, he said.

April-delivery copper on the Shanghai Futures Exchange climbed 0.6 percent to close at 59,880 yuan ($9,505) per ton, catching up with gains in London yesterday.

Aluminum was little changed at $2,263.25 a ton on the LME. Zinc fell 0.5 percent to $2,120 a ton and lead was little changed at $2,236.50 a ton. Nickel rose 0.7 percent to $21,113 per ton and tin gained 0.6 percent to $24,300 per ton.

--Helen Sun. With assistance from Jae Hur in Tokyo. Editors: Jarrett Banks, Thomas Kutty Abraham

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net


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