BS: Copper Falls as Dollar Climbs, 27-Month High Discourages Buyers
Oct. 26 (Bloomberg) -- Copper fell in London as the dollar strengthened and the highest prices in more than 27 months discouraged buying from China, the world’s largest consumer of the metal.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose as much as 0.3 percent. A stronger U.S. currency makes dollar-priced metals more expensive in terms of other monies and saps demand for commodities as an alternative investment. Copper today touched $8,554 a metric ton, the highest level since July 7, 2008.
“In the case of copper, it’s probably the high price that’s curbing demand,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “Besides that, it’s the usual suspects like the dollar.”
Copper for delivery in three months dropped $58, or 0.7 percent, to $8,460 a ton at 10:11 a.m. on the London Metal Exchange. December-delivery copper fell 0.3 percent to $3.851 a pound on the Comex in New York. Lead and zinc reached the highest prices since January on the LME.
“A dollar rally might place pressure on base-metal prices,” Anthony B. Rizzuto, a New York-based analyst at Dahlman Rose & Co., said in a report yesterday.
China’s Economy
The dollar index’s 14-day relative strength index, a gauge of whether a currency or commodity is overbought or oversold, this month fell below 20. Some analysts and traders who study technical charts view readings below 30 as a sign that prices may be poised to rebound.
Rizzuto also said concern about the economy in China, the world’s largest metals user, resurfaced last week as the government implemented further measures to curb inflation. The People’s Bank of China raised the one-year lending rate by 0.25 percentage point to 5.56 percent.
“We believe that the Chinese government is taking the right steps in preventing the economy from overheating,” Rizzuto said.
Copper premiums in China fell by a third in the past week as surging prices curbed purchases by end-users. Premiums paid by Chinese importers over the LME cash price dropped to around $80 a ton on a cost, insurance and freight basis to Shanghai, said Zhu Shiwei, an analyst at Yong’an Futures Co. That compares with $120 a ton quoted at the start of the month, he said.
Scrap Prices
Similarly, prices have slid on the Chinese scrap market as demand weakened over the past three months, Robert Stein, president of the non-ferrous division of the Bureau of International Recycling, said in an interview yesterday.
In Chile, the world’s largest copper-producing nation, unions at Anglo American Plc and Xstrata Plc’s Collahuasi mining unit called on workers to reject a wage offer, setting the stage for a possible strike at the fourth-biggest copper mine. Employees will vote tomorrow on the proposal.
“Heightened expectations of mine strike activity in South America and declining exchange stockpiles are likely to see funds add to already high long positions,” Australia and New Zealand Banking Group Ltd. analysts led by Mark Pervan in Melbourne said in a report today.
LME copper stockpiles declined for a fourth day to 367,475 tons, exchange figures showed. Orders to draw copper from LME inventories fell 1 percent to 28,425 tons.
Lead for three-month delivery on the LME reached $2,610 a ton, the highest intraday price since Jan. 11, and zinc touched $2,638.75 a ton, the highest level since Jan. 7. Shenzhen Zhongjin Lingnan Nonfemet Co., China’s third-largest zinc producer, suspended output at its biggest smelter on Oct. 21 after breaches of environmental rules.
Lead was last down 0.6 percent at $2,568.50 a ton, and zinc rose 0.6 percent to $2,581.50 a ton.
Tin fell 1.1 percent to $26,600 a ton. Prices reached a record $27,338.50 on Oct. 14. The metal has jumped 57 percent this year, leading gains on the LME, after production was disrupted in Indonesia and the Democratic Republic of the Congo.
Aluminum slid 0.3 percent to $2,366 a ton and nickel fell 1.2 percent to $23,300 a ton.
--With assistance from Glenys Sim in Singapore. Editors: Dan Weeks, Claudia Carpenter.
To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
