Copper Falls to Three-Week Low Amid Inventories Probe in China

Jun 05, 2014 2:47 pm ET

June 5 (Bloomberg) -- Copper fell to a three-week low in New York on concern that a probe into financing transactions at China’s Qingdao Port will curb demand in deals using the metal as collateral.

The port is assessing inventories in its bonded warehouses to see whether companies using copper as collateral for loans counted the same batches multiple times, said three people with direct knowledge of the investigation. The probe will make banks cautious about commodity financing, and any lending curbs would be bearish for copper, according to Macquarie Group Ltd. Prices have slid 1.1 percent this week.

“Probes into potential multiple pledges of metals for loan collateral sparked fresh fears of distress selling of commodities tied up in financing deals,” Credit Suisse Group AG said in a report today. “We feel events are a bit of a storm in a teacup, but uncertainties have stifled copper’s gentle upward moves of recent weeks.”

Copper futures for delivery in July declined 0.1 percent to settle at $3.0905 a pound at 1:18 p.m. on the Comex after touching $3.077, the lowest since May 9.

On the London Metal Exchange, copper for delivery in three months fell 0.1 percent to $6,780 a metric ton ($3.08 a pound.)

The investigation will be negative for prices if it leads to a crackdown on the metal’s use in financing transactions, which aid demand, according to Korea Exchange Bank Futures Co.

Orders to remove the metal from warehouses tracked by the LME fell for an eighth straight session, to 69,975 tons.

Nickel and aluminum gained in London for the first time in three sessions. Indonesian presidential frontrunner Joko Widodo will maintain a ban on shipments of unprocessed ores if he wins the July election, a policy document showed. Indonesia is the world’s largest producer of nickel from mines.

Newmont Mining Corp. declared force majeure on copper sales from Indonesia, after the export ban on mineral prompted a mine shutdown. Force majeure allows the company to miss deliveries because of circumstances beyond its control

Zinc, lead and tin also rose on the LME.

--With assistance from Maria Kolesnikova in London.