Virtual Metals Group

Media/Press

Copper prices down on slowdown fears

25 Sep 2008, London (The Australian Bussiness)

COPPER prices fell in London and New York amid fears of a prolonged demand slowdown and uncertainty surrounding the US bailout plan.

Copper for delivery in three months on the London Metal Exchange closed down $US75 a tonne at $US6905. The metal, used widely in power and construction, slipped 4 per cent in the previous session.

In New York, copper for December delivery shed US4.55 cents to settle at $US3.1065 a pound on the New York Mercantile Exchange's COMEX division, near the lower end of its $US3.0830 to $US3.1815 session range.

“It's obvious we're in the midst of a world economic crisis, and demand for industrial metals ... copper, zinc, nickel, tin, aluminium, are all due to fall,” said Zachary Oxman, senior trader with Wisdom Financial.

Industrial metals markets experienced high degrees of volatility overnight despite a vote of confidence from US billionaire Warren Buffet, who said he would invest $US5 billion ($6 billion) in Goldman Sachs, a Wall Street bank.

Architects of the US bailout again pressed their case before Congress, with Federal Reserve chairman Ben Bernanke saying in prepared remarks that markets and the US economy faced “very serious consequences” if Congress failed to act.

“It's really a no-man's land -- everything's going to be in limbo until it's clear how the US Congress will react to the Paulson rescue plan,” said Gary Mead, senior commodities analyst at Virtual Metals.

The US dollar slipped amid nervousness about the bailout's chances for passage. In late New York trading, the US dollar was down slightly against a basket of major currencies at 76.725, while the euro was up 0.1 per cent on the day at $US1.4659.

Analysts said industrial metals also came under pressure from news that corporate sentiment in Germany, Europe's largest economy, deteriorated for the fourth month running, and weakening data from other economies.

“Any correction we have seen is merely an upward blip in a downtrend,” GFMS Managing Director Neil Buxton said.

London copper is down about 20 per cent from its record high of $US8940 per tonne hit in April, as investors have dumped positions amid lack of demand from China and global financial turmoil.

“Supply disruptions which have helped support the market earlier this year, take a back seat in the current environment and the market will rightly focus on that demand has weakened and is likely to remain weak for the rest of the year,” Mr Buxton said.

Sentiment got a boost from another drawdown in copper stocks which fell nearly 9000 tonnes this week, mostly as material left warehouses in Korea, likely bound for China, suggesting a pick-up in demand in the world's largest consumer of the metal.

But a 1275-tonne rise in aluminium stocks to 1.36 million -- their highest level since March 2004 and enough for about 13 days of world consumption -- weighed on the metal.

“Right now everyone is talking about supply overhang, so we will not see a support to prices tomorrow or the day after,” said Commerzbank analyst Barbara Lambrecht.

“In the medium term, we think of higher aluminium prices -- they are now very close to production costs so there might be close downs of smelters.”

Aluminium, used in transport, packaging and power, closed $US5 lower at $US2503 per tonne and lead shed $US5 to $US1995 a tonne, after hitting a high of $US2080 in earlier trade, its highest since August 28.

Nickel was down $US50 at $US17,150 a tonne.

Zinc closed $US20 firmer at $US1790.

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