Copper dropped from the highest level since October as U.S. lawmakers face a renewed battle next month over government borrowing in the largest economy, hurting the outlook for demand. Tin and nickel also declined.
The contract for delivery in three months fell as much as 0.3 percent to $8,181 a metric ton before trading at $8,187 on the London Metal Exchange at 11:22 a.m. in Seoul. The price rallied to $8,255 yesterday, the highest since Oct. 18. Futures for delivery in March were little changed at $3.7310 a pound on the Comex in New York. Markets in China are closed for a holiday.
A budget bill passed by Congress on Jan. 1 that boosted metals prices, solves an immediate dilemma, averting income-tax increases for most Americans while taxing top-earners more, yet leaves unanswered a question of taming the federal debt. The legislation will delay automatic spending cuts for two months.
“The $8,200-level seems to be a bit burdensome,” Lelia Kim, a metals trader at Seoul-based Tong Yang Securities Inc., said by phone today. “It was a risk-on mode yesterday after the budget bill passed. While the fiscal cliff was temporarily avoided, spending cuts have to be discussed in two months.”
Copper advanced 4.4 percent in 2012 on the LME, the third gain in four years, helped by forecasts for supply to lag behind demand. Inventories tracked by the exchange declined 14 percent in 2012, the third straight contraction. The LMEX Index (LMEX), which tracks the six primary metals on the bourse, yesterday jumped to 3,581.7, the highest since Sept. 14.
In London, lead, aluminum and zinc were little changed.
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