Copper Snaps Four-Day Rally After U.S. Consumer Credit Plunge

By Anna Stablum

Sept. 9 (Bloomberg) -- Copper snapped a four-day rally in London after consumer credit in the U.S., copper’s second- largest user, plunged more than five times as much as forecast, casting doubt on the strength of the economic recovery.

Credit declined for a sixth month, the longest run of declines since 1991, as U.S. banks restrict lending and job losses make Americans reluctant to borrow. The MSCI World Index of shares also dropped for the first time in five days before the release of the Federal Reserve’s Beige Book business survey.

“The consumer is very cautious, traumatized both by imploding equity and housing prices, as well as legitimate fears about losing employment,” Edward Meir, a metals analyst at MF Global Ltd., wrote today in a report. On demand for metals, “we do expect a modest pullback over the September-October time.”

Copper for three-month delivery fell $35, or 0.5 percent, to $6,440 a metric ton on the London Metal Exchange by 10:21 a.m. in London. Futures for December delivery shed 1.7 percent to $2.939 a pound in electronic trading on the New York Mercantile Exchange’s Comex division.

Consumer credit in the U.S. fell a record $21.6 billion, or 10 percent at an annual rate, to $2.5 trillion, according to a Federal Reserve report released yesterday in Washington.

Copper prices more than doubled this year on record imports in the first half from China, the world’s largest consumer. The LME Index of six metals is up 73 percent.

“Upward momentum in prices will be difficult to maintain in the face of an expected fall off in Chinese metals import volumes,” Frederic Lasserre, head of commodities research at Societe Generale SA in Paris, wrote today in a report.

Copper prices may average $5,900 a ton next year, compared with $4,563 so far this year, on “steady” demand, Meir said.

Lead Smelters

Among other LME metals for three-month delivery, lead fell $1, or 0.1 percent, to $2,454 a ton. Yesterday, lead climbed as high as $2,517.25, the highest intraday price since May 7, 2008.

The metal, used mainly in batteries, has led gains this year on the LME, partly on concern about closings of smelters in China because of tighter environmental enforcement.

At least half a million tons of lead capacity is under investigation, according to Standard Chartered Plc. The country produces some 4 million tons of lead a year, almost half of total global supplies of 8.5 million tons, it said.

Tin fell 1.1 percent to $14,720 a ton. The so-called backwardation, with nearby delivery prices trading at a premium to three-month tin indicating scarce supplies, rose to $622 a ton yesterday, up 53 percent from the previous session. That’s the highest level since June 2004.

LME data show one long position, or bet on higher prices, exceeds 40 percent of tin contracts to expire in September. There are five short positions, or bets the price will fall, for the same month, according to data from Sept. 4.

Zinc shed 0.1 percent to $1,979.50 a ton, aluminum fell 0.5 percent to $1,904 and nickel rose 1.1 percent to $18,140 a ton.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net