Copper, Aluminum, Zinc Drop on China Property, Growth Concern

June 1 (Bloomberg) -- Copper, aluminum and zinc declined on concern slumping property transactions and slowing manufacturing growth in China, the world’s biggest metals consumer, may hurt demand for commodities. Lead, nickel and tin fell.

Three-month delivery copper lost as much as 2.4 percent to $6,769.75 a metric ton on the London Metal Exchange, and traded at $6,770 a ton at 1:50 a.m. Shanghai time. Aluminum dropped 1.3 percent to $2,017.50 a ton.

Real-estate transactions in Beijing, Shanghai and Shenzhen plunged in May as contracts dropped by as much as 70 percent from April, the Shanghai Securities News reported, citing data from a property website, an agent and the government. Chinese manufacturing expanded at a slower pace, adding to signs that growth may moderate in the world’s third-biggest economy.

“The property and manufacturing news fueled concerns for metals demand,” Lu Youzhong, an analyst at China Futures Co., said from Chongqing. “To add to the woes, the PBOC lifted bill yields to drain liquidity.”

The People’s Bank of China pushed up yields on one-year bills for the first time in four months, boosting returns after rates for interbank loans climbed to the highest level since September 2008. The central bank has asked lenders to set aside more capital as reserves three times this year.

Metals also fell as the Dollar Index advanced for a third day, reducing the appeal of commodities priced in the currency. The euro weakened against most of its major counterparts, extending its longest monthly decline against the dollar in 10 years, on concern that Europe’s efforts to reduce budget deficits will derail the region’s recovery.

Property Problems

China’s property market problems are worse than in the U.S. or U.K. before the financial crisis, the Financial Times said, citing an interview with Li Daokui, a member of the Chinese central bank’s monetary policy committee. China has raised minimum mortgage rates, restricted pre-sales by developers and tightened controls on purchases of second and third properties in an effort to cool growth.

“Sentiment deteriorates amid mounting concerns over China’s property market,” Tan Wentao, an analyst at HNA Topwin Futures Co., said from Shanghai.

Copper for September delivery in Shanghai retreated as much as 1.7 percent to 54,090 yuan ($7,921) a ton and traded at 54,280 yuan a ton. Aluminum slid 0.2 percent to 15,255 yuan and zinc decreased 0.6 percent to 15,960 yuan.

“Shanghai copper may test lows of 52,000 yuan soon,” China Futures’ Lu said. “Aluminum is not considered a financial investment as much as copper, while zinc has fallen more than its peers this year, so the two are more resistant to declines.”

Nickel in London slumped 2.4 percent to $20,848 and lead dropped 2 percent to $1,813 a ton. Zinc declined 1.5 percent to $1,906.50 and tin lost 0.3 percent down at $17,850 a ton.

--Li Xiaowei. With reporting by Judy Chen, Jiang Jianguo and Victoria Richards. Editor: Matthew Oakley.

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