Copper Prices Weaken Amid Fears of Chinese Monetary Policy

Copper futures prices dropped slightly, despite the news of higher Chinese imports, as market participants worried that China could tighten its monetary policy and reduce demand for the industrial metal. The decline in copper prices came as the release of key inflation data was moved forward to the weekend, sparking speculation that the data may be high and that more monetary tightening is in the pipeline. The world's top metals consumer, China, imported 379,527 metric tons of copper in August, up 11% on month and up 17% on year.

Key Takeaways:

• Copper futures prices were down 0.2% at $3.4380 a pound on the Comex division of the New York Mercantile Exchange.
• Higher interest rates or other forms of monetary tightening by China could dampen investment in key metals-consuming industries, such as the nation's booming construction sector.
• Chinese copper imports rose by 11% in August, with a total of 379,527 metric tons imported, up 17% on year.
• Warehouse stocks of copper around the globe continue to fall, with inventories in London Metal Exchange-monitored warehouses dropping to 391,400 metric tons.
• Market players were speculating the world's top metals consumer could raise its interest rates as early as this weekend.
• The Chinese inflation data, usually released during the week, was moved forward to the weekend, sparking speculation about monetary policy.

Statistics:

• Copper futures prices dropped 0.55 cent, or 0.2%, at $3.4380 a pound on the Comex division of the New York Mercantile Exchange.
• Chinese copper imports rose by 11% in August, with a total of 379,527 metric tons imported, up 17% on year.
• Warehouse stocks of copper around the globe dropped 1,975 metric tons, leading to inventories of 391,400 metric tons in London Metal Exchange-monitored warehouses.
• Inventories of copper stored in London Metal Exchange-monitored warehouses fell to 391,400 metric tons.
• Total Chinese copper imports in the January-August period were 2.95 million tons, down 0.5% from a year earlier.

Sources:

• Dow Jones Commodities News via Comtex, "Copper Prices Weaken Amid Fears of Chinese Monetary Policy," September 10, 2010.
• IG Markets, market analysts, quoted in Dow Jones Commodities News via Comtex, September 10, 2010.
• Standard Bank analyst Walter de Wet, quoted in Dow Jones Commodities News via Comtex, September 10, 2010.
• RBC Capital Markets, note to clients, quoted in Dow Jones Commodities News via Comtex, September 10, 2010.