Copper Falls Most in 16 Years in London; Demand Growth May Cool
By Simon Casey
Oct. 13 (Bloomberg) -- Copper prices fell the most in 16
years in London amid speculation that economic growth in China
and the U.S., the two biggest users of the metal, will cool as
supplies increase. Aluminum and other metals also plunged.
China's government is trying to rein in its economy and U.S.
growth is forecast to slow through next year, in part because of
record oil prices. Copper rallied to a 15-year high Oct. 8 as
hedge funds bet prices would keep climbing amid dwindling
inventories.
``It's basically the element of doubt,'' Maqsood Ahmed, an
analyst at Calyon Financial in London, said in a telephone
interview. ``There are huge positions that have been built up.''
Copper for delivery in three months fell $259, or 8.4
percent, to $2,835 a metric ton at 1:50 p.m. on the London Metal
Exchange. A close at that price would be the biggest drop since
January 1988 and the lowest since Sept. 17. The metal closed at a
15-year high of $3,145 on Oct. 8.
Copper also fell on the New York Mercantile Exchange, where
metal for December delivery dropped 12.4 cents, or 8.6 percent,
to $1.324 a pound at 8:50 a.m. on the exchange's Comex division.
A close at that price would be the biggest drop since June 1996.
Funds that use computer models to trade are selling, Russell
Newton, a director at hedge fund Global Advisors LP in London,
said in an e-mailed response to questions. Copper's 14-day
relative strength index, derived by averaging daily gains and
losses, neared 80 last week, above the 70 reading that some
traders use as a trigger to sell.
Funds Liquidate
``Much of the move has been prompted by fund liquidation,''
John Kemp, an economist at Sempra Metals in London, said of
today's trading in a note sent by e-mail. ``Turnover has been
very heavy.''
Copper fell in London after a 2.4 percent drop on the
Shanghai Futures Exchange, the biggest since June, to 29,210 yuan
($3,529) a ton. Stockpiles in warehouses monitored by the
exchange increased 29 percent this week to 28,705 tons, the most
in six weeks.
``Buyers are not willing to enter the market now given signs
that tight supply of the metal has been somewhat eased,'' said
Pan Haisheng, a metal analyst at China Aviation Futures Co. in
Shanghai.
Other metals followed copper. Aluminum fell the most in 17
years, plummeting $130, or 7.1 percent, to $1,700 as inventories
at LME warehouses jumped to a four-week high of 700,425 tons.
Nickel plunged $2,450, or 15 percent, to $13,400, which would be
the biggest drop since January 1988.
Tin slumped $525 to $8,650, and zinc lost $84 to $1,072.
Lead fell $55 to $910.
Copper Surplus
BHP Billiton, the world's biggest mining company, expects
copper production to catch up with demand in the second half of
next year, Marketing Director John Crofts said, erasing a deficit
that Barclays Capital estimates at 603,000 tons this year.
The U.S. economy, the world's largest, is forecast to grow
at a 3.8 percent annual rate in the fourth quarter, down from 4
percent in the previous three months, according to analysts
surveyed by Bloomberg. Crude oil prices in New York topped $54 a
barrel yesterday.
China's government is trying to cool its growth to 7 percent
from 9.7 percent in the first half to avoid overheating its
economy. China should use more market-based measures to achieve
that goal, the central bank said on its Web site, suggesting it
might consider boosting interest rates for the first time in nine
years.
Policy makers should ``further let the market mechanism play
a fundamental role in allocating resources, and continue to
appropriately adjust the money supply,'' the People's Bank of
China said today in a statement on its Web site, reiterating
comments made on Sept. 27. Interest rates weren't mentioned.
China uses about 30 percent of its copper in electrical
cables for the country's expanding power grid. In the U.S.,
builders use about 40 percent of copper supplies. A new house
contains about 400 pounds of the metal and a new car 50 pounds,
according to the New York-based Copper Development Association.
--With reporting by Helen Yuan in Shanghai, Tian Ying in Beijing,
Chiapeck Wong in Singapore and Carlos Torres and Alex Tanzi in
Washington. Editor: Farr, Stroth. |
