Copper Futures Ease as Chinese Lending Slows Down

A slowdown in Chinese bank lending has sent copper futures plummeting, with the July delivery contract on the Comex division of the New York Mercantile Exchange recently trading at $4.0290 a pound, a 2.6 cent or 0.6% decline from the previous day. This development comes as Chinese officials have been trying to keep the country's economy from overheating by raising the amount of cash banks must deposit with the central bank and hiking interest rates. Benchmark copper futures have pulled back from February's record highs above $4.60 a pound as traders bet that such measures would hit the country's appetite for industrial metals.

Key Takeaways:

• The value of new loans issued by Chinese banks in May declined by 25% from April levels, according to the People's Bank of China.
• Copper futures have been pulled back from February's record highs above $4.60 a pound as traders bet that Chinese monetary tightening would hit the country's appetite for industrial metals.
• Copper imports in May were down 3% from April and 36% from the same month in 2010, according to China's government customs administration, providing evidence that the country's lending slowdown is dampening copper demand.
• Further declines in the metal may be likely, with Bob Haberkorn, a senior market strategist with brokerage Lind-Waldock, stating that copper looks like it's favoring a lull below the $4 level.
• Market participants are also looking ahead to Chinese consumer price data, scheduled for release on Tuesday, which will provide a hint as to whether further Chinese monetary tightening is on the horizon.
• Standard Bank analyst Leon Westgate noted that the report should provide a hint as to whether further Chinese monetary tightening is on the horizon.
• Benchmark copper on the Shanghai Futures Exchange ended lower on Monday, pressured by declines in commodities and equities ahead of Tuesday's data.

Statistics:

• Copper futures declined 2.6 cents or 0.6% to $4.0290 a pound on the Comex division of the New York Mercantile Exchange.
• The value of new loans issued by Chinese banks in May declined by 25% from April levels.
• Copper imports in May were down 3% from April and 36% from the same month in 2010.
• Copper futures have pulled back from February's record highs above $4.60 a pound.
• The metal last dipped below the $4 mark in May, but was quick to recover.

Sources:

• Dow Jones Commodities News via Comtex
• The People's Bank of China
• Lind-Waldock
• Standard Bank
• China's government customs administration
• Dow Jones Newswires