Thu Oct 20, 2011 2:55pm EDT
* Copper leads commods rout with 6.6 pct decline
* Zinc, lead, aluminum hit lowest in more than one year
* EU summit will not reach EFSF decision – sources
* Coming up: Weekly Shanghai metals inventory data Fri.
By Chris Kelly and Silvia Antonioli
NEW YORK/LONDON, Oct 20 (Reuters) – Copper prices tumbled nearly 7 percent on Thursday, the biggest one-day collapse in four weeks, on fears of a double-dip recession and growing doubts that Europe will get a handle on its debt crisis. Metals, often seen as a proxy for underlying economic conditions due to their wide use in industry, were hit hard by the specter of a global slowdown with lead, zinc and aluminum all hitting their lowest level in more than a year.
Taking its directional cues from Asia, where prices fell the 6-cent daily limit, copper’s decline far outstripped losses in other commodities, bucking its bullish supply situation, where the world’s second-largest copper mine is running at about two-thirds of its capacity after a month-long strike. Other risky assets like oil and agricultural commodities went down between one and two percent.
“Copper tends to lead other markets. If copper prices are starting to begin another leg lower now — nearly 10 percent in just two days — that’s not just a blip on the radar … it is indicative of investors’ concern about the global economy,” said Adam Sarhan, chief executive of New York-based Sarhan Capital.
“Copper right now is signaling that the global economy might be in for a double dip.”
London Metal Exchange (LME) benchmark copper dived $475 or 6.6 percent to finish at $6,735 per tonne, its biggest daily decline since Sept 22, when it plunged over 7.5 percent.
In New York, the key December COMEX contract dropped 20.05 cents or 6.2 percent to settle at $3.0575, close to the bottom end of its $3.2350 to $3.0310 session range. Volumes perked up Thursday as the selling intensified. Close to 64,000 lots traded in New York, nearly 12 percent above the 30-day average, according to
Thomson Reuters preliminary data. Copper extended a reversal from Monday’s three-week high near $3.50 in New York and $7,660 in London, leaving both markets vulnerable for a retest of their 2011 lows, at $2.99 and $6,635, respectively.
“People are saying these metals are not trading on the fundamentals, they are trading on the macro, but there is nothing more fundamental in the worldthan the economic outlook,” analyst Stephen Briggs of BNP Paribas said. “The bank’s (BNP Paribas) view is that Europe will muddle through and find a solution, but clearly the market is worried that that might not be the case,” he added.
A high-profile EU summit will go ahead on Sunday as planned, according to sources in Germany’s ruling coalition, but it will not reach a decision on leveraging the euro zone rescue fund, the European Financial Stability Facility(EFSF). Sentiment briefly improved after the Federal Reserve Bank of Philadelphia said its index of business conditions in the U.S. Mid-Atlantic region rose in
October. WARY CUSTOMERS
BHP Billiton , the world’s largest miner, in the face of short-term market volatility warned on Thursday of increasingly wary customers, although it said its order books were full due to resilient Chinese demand.”We are also seeing that customers are looking closely at their inventory levels as they operate their businesses, cognizant of the potential need totailor their plans if the global economic uncertainty continues,” Chief Executive Marius Kloppers said in London. Customer buying interest remained strong, he said, fueled by China, where domestic stockpiles have been “substantially liquidated.”China is the world’s largest copper consumer, accounting for roughly 40 percent of global demand of refined metal. Monthly imports of copper products rose to a 16-month high in September.
Metal Prices at 1816 GMT
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
COMEX Cu 306.35 -19.45 -5.97 444.70 -31.11
LME Alum 2085.00 -97.00 -4.45 2470.00 -15.59
LME Cu 6730.00 -480.00 -6.66 9600.00 -29.90
LME Lead 1789.00 -81.00 -4.33 2550.00 -29.84
LME Nickel 18000.00 -800.00 -4.26 24750.00 -27.27
LME Tin 21200.00 -725.00 -3.31 26900.00 -21.19
LME Zinc 1740.00 -98.00 -5.33 2454.00 -29.10
SHFE Alu 16040.00 -345.00 -2.11 16840.00 -4.75
SHFE Cu* 50950.00 -2940.00 -5.46 71850.00 -29.09
SHFE Zin 13850.00 -740.00 -5.07 19475.00 -28.88
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
Reuters Quote: METALS-Copper crumbles 7% as double-dip fears bite
Thu Oct 20, 2011 2:55pm EDT