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Copper Advances in London as China Signals End to the Yuan Peg; Zinc Rises
By Bloomberg News - Jun 21, 2010
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Copper advanced, gaining by the most in a month, as China signaled an end to the yuans fixed rate to the dollar, boosting confidence in the global economic recovery and lifting the demand outlook for raw materials.

Three-month delivery copper jumped as much as 4.6 percent to $6,729.75 a metric ton on the London Metal Exchange, the biggest gain since May 18. The contract traded at $6,695 at 2:54 p.m. in Shanghai. Zinc increased as much as 5.3 percent to $1,821.75 a ton before trading at $1,808.75.

The dollar weakened against most of its major counterparts and reached a four-week low versus the euro after the Peoples Bank of China two days ago indicated its abandoning the 6.83 yuan peg to the dollar. Industrial metals, priced in the dollar, usually move counter to the currency. The decision was made after the worlds third-largest economy improved, the central bank said, one week before a Group of 20 summit.

London metal prices rose on heightened expectations of a stronger yuan, Zhao Kai, an analyst at Jinrui Futures Co., said from Shenzhen today. The yuan move may lead to stronger London prices as compared to Shanghai in the short term, another Jinrui analyst Zhao Xiaorui said.

Copper entered a bear market in London earlier this month, plunging more than 20 percent from an April peak on concern that the global economic recovery may be at risk. The metal slumped as low as $6,037.50 on June 7, the lowest price in eight months. Shanghai copper fell 18 percent from this years high of 63,720 yuan ($9,353) in April.

Chinas central bank ruled out a one-time revaluation, saying there is no basis for large-scale appreciation, and kept the yuans 0.5 percent daily trading band unchanged.

Shanghai Copper

Copper for September delivery in Shanghai jumped by the daily 5 percent limit to 53,920 yuan a ton and closed at 53,700 yuan. Shanghai zinc also climbed 5 percent to 14,845 yuan and aluminum added 3.2 percent to 15,005 yuan.

Yuan appreciation may increase expectations for more copper imports in the short term, which is bullish for London prices but bearish for Shanghai, Li Ye, an analyst at Minmetals Star Futures Co., said from Shenzhen.

Copper imports by China, the largest consumer, declined for a second month in May as seasonal demand lagged behind expectations, boosting stockpiles.

Inbound shipments of refined copper were 279,690 tons last month, the Beijing-based customs office said today. Thats 9.7 percent below the amount in April and 17.1 percent less than a year earlier, according to Bloomberg calculations.

Aluminum in London rose 3.4 percent to $2,011 a ton, lead advanced 3.4 percent to $1,805 a ton, nickel climbed 3.1 percent to $20,200 a ton, and tin jumped 4.6 percent to $18,250 a ton.

--Li Xiaowei. Editors: Richard Dobson, Jake Lloyd-Smith.

To contact the Bloomberg News staff on this story: Li Xiaowei in Shanghai at [email protected]