BLBG:Copper Slumps Into Bear Market as Fed Assessment Hurts Outlook
Copper tumbled into a so-called bear market, slumping for a fifth day after the Federal Reserve said that the U.S. economy faces “significant downside risks,” eroding prospects for industrial-metals demand.
The three-month contract on the London Metal Exchange fell as much as 3.1 percent to $8,039.75 per metric ton to the lowest price since Nov. 17. That’s 21 percent below the record $10,190 per ton set on Feb. 15, more than the 20 percent drop that’s regarded by some investors as signaling a bear market.
Asian stocks lost 2.4 percent as a plan by the Fed to buy more long-term bonds failed to lift investor confidence. Policy makers said yesterday that they will replace much of the short- term debt in their portfolio with longer-term Treasuries in an effort to keep the economy from relapsing into a recession.
“The Fed reconfirmed a slowing global economy after a cut to the growth outlook by the IMF a day earlier,” said Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. Still, with steady demand from China any significant drop would be limited by tight supplies amid labor disputes at mines, he said.
The Standard & Poor’s 500 Index tumbled 2.9 percent and the Thomson Reuters/Jefferies CRB Index of raw materials fell 1.1 percent yesterday after the U.S. central bank’s announcement.
Copper has slumped as concerns that the global economy is slowing outweighed a shortfall in the metal used to make cables. The world economy will expand 4 percent this year and in 2012, the International Monetary Fund said on Sept. 20, cutting June forecasts of 4.3 percent for 2011 and 4.5 percent for next year.
Grasberg Strike
Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, said yesterday that a strike at its Grasberg mine in Indonesia will cost the company about 3 million pounds (1,361 tons) a day.
Refined-copper imports by China, the largest user, gained for a third month in August on increasing arbitrage trade between London and Shanghai amid low domestic stockpiles. Imports rose 21 percent to 235,509 tons last month from 194,280 tons in July, according to the General Administration of Customs. The arrivals were 12 percent lower than a year earlier.
Aluminum shed 0.9 percent to $2,298 a ton in London, zinc dropped 1 percent at $2,056 a ton and tin fell 3 percent to $21,000 per ton. Lead gained 0.2 percent to $2,225 per ton and nickel was little changed at $20,425 per ton.
To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
