Copper Drops Most in a Month in Shanghai on China Loan Rules

By Glenys Sim

Oct. 29 (Bloomberg) -- Copper fell the most in a month in Shanghai, tracking an overnight drop in London and New York, after the Chinese government said it plans to tighten rules on personal loans.

Copper and zinc declined after the China Banking Regulatory Commission announced yesterday a draft rule aimed at ensuring loans enter the real economy instead of being used for speculation. The measure was announced after the close of trade.

“The market managed to rally in the middle of a slowdown thanks to the availability of credit,” said Lu Wei, an analyst at Jiangsu Holly Futures Brokerage Co. “People who have no business buying copper were said to be making purchases and driving prices higher and this may all come to an end soon.”

January-delivery copper on the Shanghai Futures Exchange fell as much as 2.7 percent to 49,900 yuan ($7,306) a metric ton, the biggest intraday drop since Sept. 28 and the lowest price for a most-active contact since Oct. 21. Zinc futures lost as much as 2.9 percent, the most since Sept. 14, and ended the day down 2.7 percent at 16,465 yuan a ton.

Copper for delivery in three months on the London Metal Exchange was little changed at $6,432 a ton after dropping 2.3 percent yesterday, the largest decline in almost a month. Copper prices have more than doubled this year as China’s $586 billion stimulus package and record lending spurred raw material purchases.

“We’re seeing risk being pulled from all markets, not just metals,” said Lu.

A report yesterday showed U.S. new home sales unexpectedly fell 3.6 percent in September. Builders are the biggest copper users in the U.S., where government tax credits for first-time home buyers will end next month. The U.S. and China are the two largest consumers of the metal used in construction and automobiles.

Among other LME-traded metals, aluminum and lead were little changed at $1,908.50 a ton and $2,232 a ton respectively. Zinc fell 0.5 percent to $2,178.75 a ton, nickel declined 0.4 percent to $17,730 a ton, and tin slipped 0.3 percent to $14,600 a ton.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net