Copper Fluctuates on Outlook for Further Tightening in China

Jan. 10 （Bloomberg） -- Copper in London swung between gains and losses as investors weighed the possibility of further tightening in China after the world’s largest metals user reported a less-than-forecast trade surplus.

Three-month copper on the London Metal Exchange rose as much as 0.5 percent to $9,459 a metric ton, after falling 0.4 percent earlier. It traded little changed at $9,402 by 12:05 p.m. Singapore time. Aluminum, zinc and lead declined.

China’s trade surplus was $13.1 billion in December, the customs bureau said on its website today, compared with the $20.8 billion median estimate of 20 economists surveyed by Bloomberg News and November’s $22.9 billion. The country’s imports of copper and its products fell to 344,558 tons in December, down from 351,597 tons the previous months and 369,370 tons a year earlier.

“The issue of tightening in China has been brought back to the fore and against this backdrop, investors are unwilling to enter the market at such high levels and consumers are also unwilling to buy at such high prices,” said Yang Zhenqiang, an analyst at First Futures Brokerage Co.

April-delivery metal on the Shanghai Futures Exchange rose 0.6 percent to 70,190 yuan （$10,585） a ton, paring an earlier advance of as much as 1.3 percent. Copper on the Comex in New York gained 0.4 percent to $4.2980 a pound, after climbing as much as 1.1 percent earlier.

China Tightening

China ordered banks to set aside more reserves six times in 2010 and boosted rates twice to tame inflation and curb asset bubbles after record gains in lending and property prices. The central bank should consider a series of interest rate increases of 50 basis points if the country’s consumer prices remain high in the first half of this year, Liu Yuhui, a researcher with the Chinese Academy of Social Science, wrote in a commentary published in the China Securities Journal today.

“We’re still positive on the outlook because China’s may slow but it will still grow and is unlikely to change the expectation for a deficit this year,” said Yang. The International Copper Study Group is expecting a 435,000-ton global deficit in the refined metal this year.

Aluminum in London dropped 0.3 percent to $2,510 a ton, zinc declined 1.4 percent to $2,410 a ton, and lead decreased 0.5 percent to $2,635.50 a ton. Tin shed 0.2 percent to $26,400 a ton, while nickel was little changed at $24,225 a ton.

--Editors: Richard Dobson, Ravil Shirodkar.