Copper Drops to Lowest in Almost 15 Years as Economies Slow
London, Oct. 22 (Bloomberg) -- Copper fell to its lowest
price in almost 15 years on expectations for slowing demand in the
$21.5 billion market from users such as electronics makers and
construction companies.
``The market is in a surplus -- stocks are high and demand
has slumped,'' said Alan Williamson, an analyst at HSBC Markets in
London, before the metal reached today's low. ``It's up to the
producers now to do something about it'' by closing mines.
Copper for delivery in three months fell as much as $10 to
$1,364 a metric ton on the London Metal Exchange, where prices are
down 25 percent this year. Copper was last this low in February
1987.
In June 1999, when prices bottomed at $1,365 a ton, Phelps
Dodge Corp. cut copper production by 8 percent and fired 1,650
employees, 12 percent of its workers. Broken Hill Proprietary Co.,
now part of BHP Billiton Group, dismissed 2,630 employees and shut
unprofitable U.S. copper mines.
Phelps Dodge, the second-largest copper miner, may announce a
production cut of about 225,000 tons a year when it reports third-
quarter results tomorrow, Williamson said. Without that move,
copper will have further to fall, he said.
In the U.S., the largest copper-consuming country, permits to
start new houses fell last month to the lowest rate since December
1997. In Germany, Europe's largest economy, business confidence in
September posted its biggest decline in almost 28 years. In Japan,
central bank Governor Masaru Hayami today said a record jobless
rate may rise and wages drop as companies decrease output.
Lower Prices Seen
Speculators as of Tuesday had their biggest bet against
copper prices since at least 1986, selling a net 25,273 copper
contracts in New York, the U.S. Commodities Futures Trading
Commission reported Friday.
Prospects for any turnaround will dominate discussions at the
London Metal Exchange Week starting today, the world's biggest
gathering of buyers, sellers, brokers and analysts in the
business. While LME Week usually attracts more than 5,000,
attendance is expected to drop as companies cut travel costs and
some people avoid flying from fear of terrorism.
Bookings for the centerpiece event, a black-tie dinner at the
Grosvenor House Hotel, are down about 5 percent from last year to
about 1,425, while numbers for a seminar held by the LME are off
by a fifth, the LME has said.
Some traders have simply quit the business. This month,
Scotiamocatta, a unit of Bank of Nova Scotia, left the floor of
the LME with the loss of about 20 jobs. N.M. Rothschild, an
associate broker at the LME, said it is leaving because it expects
no improvement in prices.
World copper production last year totaled some 11.68 million
tons, according to the World Bureau of Metal Statistics. That had
a value of about $21.5 billion, based on the average selling
prices on the LME.
Inventories Swell
As demand for the metal slows, LME copper stockpiles have
more than doubled this year to the highest level in 18 months.
Inventories dipped by 2,575 metric tons to 737,900 tons today.
Demand for copper, a rustproof conductor of heat and
electricity, is sensitive to economic fluctuations because it is
used by a range of industries including electronics companies for
wiring, and construction companies for pipes. The Sept. 11
terrorist attacks have further reduced economic growth in the U.S.
and elsewhere as business and consumer confidence plunged.
Some manufacturers said prices have sunk low enough to
present a buying opportunity.
``Now is a good time to buy,'' said Steve Nother, general
manager of U.K.-based Dorset Tube Ltd., which purchases some 1,500
tons of copper a year. ``For industry, anything less than 1,100
pounds ($1,571) a ton is good for buyers.''
--Jon Hurdle in the London newsroom (44) 207 673 2095 or
jhurdle1@bloomberg.net with reporting by Thomas Tugendhat/tc/cm |
