Chinese copper bar saw the biggest price decline of the day, dropping 4.9 percent ton on Monday on the MetalMiner IndX℠.
Much of the copper stored in China, the world’s biggest consumer of the metal, is used by companies and investors as collateral for loans from banks and other lenders. They then invest the money in higher-yielding assets, the Wall Street Journal reported. Some investors are concerned that the recent sharp drop in copper prices could lead to a downward spiral in the market.
Chinese primary cash copper saw its price drop 4.9 percent to a 30-day low. Chinese copper wire held its value on Monday. The price of Chinese bright copper scrap continues hovering in a short range for the fifth straight day.
As prices fall, borrowers could come under pressure to post more collateral, forcing them to sell copper to raise money. Banks could also become less willing to accept copper as collateral.
Copper’s recent price drop demonstrates the challenges ahead for China’s government as it attempts to reduce risks in the financial system and curb speculation. Among the measures taken by Beijing are restrictions on conventional lending.
More Copper Prices
The price of US copper producer grade 122 fell 3 percent. The price of US copper producer grade 110 was off by 3 percent on Monday. The price of US copper producer grade 102 saw a 2.9 percent decline. The cash price of primary Japanese copper gained 0.7 percent.
On the LME, the primary copper cash price declined 1.8 percent to $6,930 per metric ton. The copper 3-month price weakened by 1.7 percent on the LME, settling at $6,915 per metric ton.