Copper Drops as China Tightens Liquidity, Curbs Speculation

Copper declined as China, the largest metals consumer, pledged further tightening measures to control liquidity to fight inflation.

The metal for three-month delivery fell 0.3 percent to $8,224.75 at 3:31 p.m. in Singapore. Copper for March delivery on the Shanghai Futures Exchange closed 0.6 percent lower at 62,080 yuan （$9,336） a ton.

“Despite some positive news overnight, copper is more likely to be capped in a range rather than return to an upward trajectory,” Zhu Haitao, an analyst at Zhongcai Futures Co., said by phone from Shanghai. China’s measures to tighten monetary policy will squeeze the flow of speculative money and help cool commodities markets, he said.

China’s central bank said yesterday it will strengthen liquidity management and “normalize” monetary conditions after having twice this month ordered banks to hold more in reserves to curb inflation that’s at a two-year high. The nation will use quantitative and price tools to manage liquidity, Hu Xiaolian, a deputy governor of the People’s Bank of China, said in a statement posted on the central bank’s website.

Both higher rates and bank reserve ratios may be needed to control liquidity, PBOC adviser Xia Bin said at a conference in Shanghai today.

Commodities markets have reacted to the State Council’s earlier notice to clamp down on market manipulation and excessive speculation, the National Development and Reform Commission said on its website today, explaining the recent decline in commodity prices.

“A series of price-control measures has already helped to cool down the market a bit,” said Wang Zhouyi, deputy manager of the research department at Shanghai CIFCO Futures Co. “But commodities markets are global, so ultimately it’s impossible to drive the markets by policies from one single player.”

U.S. Economy

Copper gained earlier after household purchases in the U.S. increased for a fifth month in October, advancing 0.4 percent after a 0.3 percent gain in September, the Commerce Department reported yesterday. Jobless claims fell by 34,000 to 407,000 in the week ended Nov. 20, the fewest in more than two years, Labor Department figures showed.

“The U.S. data showed economic activity has mildly strengthened and investors have become more willing to take risks,” Minmetals Futures Co. said in a research note today.

In Chile, the wage dispute at Anglo American Plc and Xstrata Plc’s Collahuasi mine continued. The company extended an offer until Nov. 26 from Nov. 23, saying it will go on negotiating directly with workers in a bid to end the strike at the world’s fourth-biggest copper mine.

Aluminum in London was unchanged at $2,259 a ton and lead was little changed at $2,120 a ton. Nickel declined 0.7 percent to $22,351 a ton, while tin fell 0.2 percent to $24,250 a ton.

--Helen Sun. Editors: Richard Dobson, Jarrett Banks.