NEW YORK/LONDON –– Crude oil, copper and gold led a drop in commodities, heading for the worst month in at least 38 years, on expectations a global recession will curb raw-material demand.
Oil extended four consecutive weekly declines, copper traded at a three-year low and the slide in gold increased the chances of the metal breaking its seven-year winning streak. The S&P GSCI index of 24 raw materials fell 3.3 percent, extending its retreat this quarter to 33 percent, the most since at least 1970.
“There’s blood everywhere,” said Lars Steffensen, managing director of Ebullio Capital Management LLP in Southend-on-Sea, England. Commodities “are going to be as exaggerated on the downside as much as the way they went up.”
Business confidence in Germany, Europe’s biggest economy, declined to the lowest in more than five years in October, the Ifo institute said Monday. The Bank of Korea slashed interest rates by a record Monday and Ukraine got a US$16.5 billion International Monetary Fund loan.
Oil for December delivery dropped as much as US$2.85, or 4.4 percent, to US$61.30 a barrel on the New York Mercantile Exchange and was at US$62.53 a barrel as of 10:05 a.m. in London.
The fuel fell on concern that the Organization of Petroleum Exporting Countries’ agreement to cut production for the first time in almost two years won’t be enough to stem a price collapse. Oil reached a record US$147.27 on July 11.
“There have been fairly dramatic adjustments to consumption,” said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney.
On the London Metal Exchange, the main industrial metals other than tin declined.
Copper for delivery in three months fell US$120, or 3.2 percent, to US$3,650 a metric ton. Aluminum dropped 1.6 percent, nickel 6 percent and lead 6.8 percent. The LME index of six metals retreated more than 15 percent last week, the worst performance since at least 2000.
Merrill Lynch & Co. Monday cut its 2009 forecast for copper by 41 percent, its aluminum outlook by 19 percent and its nickel estimate by 36 percent.
“The metals/mining sector is clearly pricing in a woeful economic environment for 2009 and beyond,” Jason and Daniel Fairclough and Daniel Lian in London, wrote in a report Monday. “There will be a global recession but how deep and for how long is the unknown.”
The 162-member Bloomberg World Mining Index has plunged 70 percent this year, taking its combined market capitalization to US$476 billion on Oct. 24, from as much as US$1.86 trillion in March, according to Bloomberg calculations.
Gold for immediate delivery fell US$17.30, or 2.4 percent, to US$717.45 an ounce in London. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has stalled after reaching a record 770.6 metric tons on Oct. 10. Holdings stand at 747.1 tons.
A strengthening dollar “is fueling the gold selling,” said Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Hanau, Germany-based Heraeus Metallhandels GmbH, which owns five precious metals refineries.
Platinum retreated as much as US$56.25, or 7 percent, to a five-year low of US$744.25 an ounce. Merrill cut its 2009 platinum estimate by 42 percent to US$1,100 an ounce.
Among other commodities, benchmark European coal derivatives fell below US$100 for the first time since October 2007. Natural rubber futures fell by the daily price limit in Tokyo. Corn tumbled to a 21-month low in Chicago.
“The coming quarters will see the European Union steel market entering a period of temporary instability and oversupply,” Brussels-based lobby group Eurofer said in a statement Monday. “The latest projections are particularly more pessimistic for 2009 and indicate that the downward trend is expected to accelerate during the first half of next year.”
