Copper Down on China Bank Collateral Investigation

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Chinese authorities have begun an investigation into allegations that several companies pledged the same copper and other industrial metals held at the port of Qingdao as collateral for loans to different banks, Reuters reported.

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Beijing is stepping up efforts to curb the country’s vast shadow banking system and the revelations could see a further clampdown on this lending practice, which have been a key part of the commodities trade – particularly in iron ore and copper – for years.

As these deals are being unwound it could lead to a dumping of copper onto the market that would otherwise have been tied up in financing deals leading to sharply lower prices.

The Japanese copper cash price experienced the biggest price decline of the day, dropping 1.3 percent to close at JPY 731,000 ($7,137) per metric ton on Friday, June 6. The price of US copper producer grade 110 flattened at $3.79 following two-days of declines. The price of US copper producer grade 102 flattened at $3.98 per pound after two days of downward movement. After dropping for two days, the price of US copper producer grade 122 flattened at $3.79.

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Chinese copper prices were flat for the day. Chinese copper wire held its value last Friday at CNY 50,025 ($8,028) per metric ton. The price of Chinese copper bar held steady at CNY 50,900 ($8,168) per metric ton. The Chinese copper cash price saw little change in its price last Friday at CNY 51,100 ($8,200) per metric ton. For the fifth consecutive day, the price of Chinese bright copper scrap held flat at CNY 44,300 ($7,109) per metric ton.

On the LME, the primary copper cash price fell 0.5 percent to $6,800 per metric ton. The copper 3-month price weakened by 0.1 percent on the LME, settling at $6,770 per metric ton.

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