Copper Declines From Record as Rally Deters Buying; Zinc Slumps

Jan. 5 （Bloomberg） -- Copper dropped from a record and zinc fell the most in a month, leading declines in industrial metals, as the recent rally in raw materials deterred purchases and encouraged investors to sell commodities to lock in gains.

Three-month copper on the London Metal Exchange fell as much as 0.9 percent, the most in two weeks, to $9,490 a metric ton, and traded at $9,494.50 by 10:01 a.m. Singapore time. The metal, which jumped 30 percent last year as the global economy recovered from the worst recession since World War II, surged to $9,754 a ton yesterday. Lead declined by the most in three weeks, and aluminum and nickel fell the most in two weeks.

“The exuberance in the run up to the new year was a bit excessive and a correction is only healthy,” Gao Jie, an analyst at Dayou Futures Co., said from Shanghai. “There are almost no physical buyers of copper at these levels as seen in the contango in China, and anecdotal evidence suggests downstream consumers are amply stocked at the moment.”

The metal for April-delivery on the Shanghai Futures Exchange lost as much as 2.2 percent, the most since Nov. 23, to 70,810 yuan （$10,692） a ton. Spot copper in Changjiang, Shanghai’s biggest cash market, has been mostly trading at a discount to futures prices, a situation known as contango, for the past three months.

Inventories monitored by the Shanghai Futures Exchange climbed to a six-month high of 131,891 tons last week, while stockpiles in LME warehouses rose for a 14th session on Dec. 31 to the highest level in three months.

A rebound in dollar also eroded the appeal of commodities as alternative investments, said Gao. The greenback gained for a third day against a six-currency basket including the euro and yen before reports on U.S. jobs and services that may provide more evidence the economic recovery is gaining momentum.

Aluminum in London dropped as much as 1.2 percent to $2,454 a ton, zinc tumbled as much as 2.7 percent to $2,402.25 a ton, and lead declined as much as 1.9 percent to $2,559 a ton. Nickel shed as much as 1.4 percent to $24,800 a ton, while tin gained 1 percent to $26,600 a ton.

--Editors: Richard Dobson, Jake Lloyd-Smith.