Bloomberg News

IMF Says Metals May Decline 2.7% If China Real Estate Weakens

July 25, 2012

Zinc and nickel prices may be the hardest hit if real estate investment in China, the top user of industrial metals, contracts by 2 percent, bringing about a 2.7 percent drop in metals, the International Monetary Fund said.

Economic growth in China slowed in the second quarter to 7.6 percent, the weakest pace since 2009. A two percent downturn in property investment may see metals decline by 2.7 percent year-on-year, with zinc falling 4.3 percent, nickel 3.7 percent, lead 3.2 percent and copper 3.1 percent, according to the IMF.

“The impact on overall metal prices could last four quarters, with up to five to six quarters for lead and zinc,” the Washington-based fund said in its annual report on China published on its website yesterday.

The IMF’s analysis comes after the official Xinhua News Agency said on July 20 Beijing wouldn’t ease restrictions on home purchases and would keep a “firm grip” on the market to prevent house prices rebounding.

Home prices in June rose in the most number of cities tracked by the government in 11 months, China’s National Bureau of Statistics said July 18. Prices climbed from the previous month in 25 of the 70 cities that the government reviews, the most since July last year.

“A disorderly decline in real estate investment could have significant implications for growth in China and the global economy,” the IMF said.

Property investment accounts for a quarter of total fixed asset investment in China, which was $2.4 trillion in the first half of 2012, according to the country’s statistics bureau.

On the London Metal Exchange, nickel is down 15 percent this year, lead has fallen 8.4 percent, tin 8.3 percent, aluminum 6.8 percent, copper 1.9 percent and zinc 1.6 percent in London. The LMEX index, a measure of the performance of industrial metals traded on the London bourse, is down 5.1 percent this year.

To contact the reporter on this story: Tom Metcalf in London at tmetcalf7@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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