Copper and other metals fall
Copper Falls to 2-Week Low in London on Strike, China Demand
July 23 (Bloomberg) -- Copper fell to a two-week low in London as a strike at Grupo Mexico SA's La Caridad mining complex neared an end, the dollar strengthened and futures prices slid in Shanghai. Nickel plunged as much as 8.2 percent, the most in six months.
Mexican officials ordered an end to the 11-day strike as the dollar headed for a weekly gain against the euro and yen, spurred by optimism about U.S. economic growth. The drop in Shanghai prices indicated lower demand for the metal in China, the world's biggest copper consumer.
`It's a combination of all those factors triggering stock selling,'' said Adam Rowley, analyst at Macquarie Bank in London.
Copper for delivery in three months fell as much as 3.3 percent to $2,700 a metric ton on the London Metal Exchange, the biggest drop in a month. It was down $88, or 3.2 percent, to $2,705 at 11:57 a.m.
``We've been subject to some heavy, persistant instutional selling,'' said Roy Carson, a trader at Triland Metals Ltd. in London. Copper may stay close to its 30-day and 50-day moving averages for prices, now at $2,683 and about $2,696, he said.
The dollar strengthened to $1.2176 against the euro, near a three-week high, making dollar-denominated metals more expensive for holders of the European currency. Copper has still risen 58 percent in a year, driven by China demand.
Construction Slowdown
Copper for delivery in November fell $67, or 2.2 percent, to $2,505 a ton on the Shanghai Futures Exchange as Chinese Premier Wen Jiabao tries to cool growth in the world's seventh-largest economy to 7 percent this year from 9.1 percent in 2003. The government has restricted bank lending for home construction, according to Chile's government-owned copper institute Cochilco, curbing copper demand.
The U.S. Commerce Department said this week housing starts in the U.S., the world's largest economy, unexpectedly fell 8.5 percent in June to the lowest in a year and building permits declined by the most in a decade. New homes use about 400 pounds of the metal for wiring and plumbing pipes.
The dollar gained this week after Federal Reserve Chairman Alan Greenspan told Congress the U.S. economy will likely outgrow ``softness'' and is prepared for ``a more dynamic adjustment of interest rates.'' The Fed last month raised its rate target for the first time in four years and has four more scheduled policy meetings this year.
Speculation that the Fed might delay rate increases had helped copper to rally by 10 percent in the month before yesterday. Hedge funds increased investments in gold and copper this month, more than doubling their holdings on the Comex division of the New York Mercantile Exchange, figures from the U.S. Commodity Futures Trading Commission showed last week.
Copper Deficit
Copper prices fell even as copper inventories slipped to 91,525 tons at LME warehouses, an eight-year low. The International Copper Study Group in Lisbon has predicted a deficit of 750,000 tons this year.
That gap may narrow as producers boost supplies. Minera Escondida, the world's biggest copper mine, increased output by 17 percent in the first half to a record 599,400 tons, according to Rio Tinto Plc. Grasberg, the world's second-largest copper, is on track to meet this year's output targets, owner Freeport- McMoRan Copper & Gold Inc. said this week.
Grupo Mexico, the world's third-largest copper producer, ``hopes to resume operations'' at La Caridad, it said in an e- mailed statement. Mexican mediators yesterday declared illegal a strike by 2,000 employees at the site and a possible walkout by 1,200 workers at the Cananea mine, both in northern Mexico.
Other metals fell with copper as investors sold. Nickel, used to make stainless steel rustproof, had its biggest drop since Jan. 6. The metal was trading down $1,230 at $13,750 a ton, a five-week low.
Tin, used to make food cans and solders for electronics, fell $325, or 3.7 percent, to $8,500 a ton as LME stockpiles rose a fourth day to 5,660 tons. The inventories touched an all-time low of 2,745 tons in June, sending prices to 15-year highs.
Aluminum lost $41 to $1,660, zinc dropped $14 to $978 and lead was down $30 to $847.
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