The biggest rout in copper since the global recession drove analysts to cut their price forecasts by 16% in a week as mounting concern about growth eroded expectations for supply shortages. According to the median in a Bloomberg survey of 16 analysts and traders, the metal may drop as much as 10% to USD 6,500 per tonne by December 31st 2011. Their estimate was USD 7,773 per week ago. Speculators in US futures are making the biggest wager on declining prices in more than two years, US government data show. Barclays Capital cut its forecast for the shortfall in global supplies five times since April and Deutsche Bank AG is anticipating a surplus as early as next year. Commodities tumbled into a bear market this month, dropping 21% since April, on concern that slowing growth will curb demand for raw materials. Prices had more than doubled since the beginning of 2009 as surging consumption led by emerging markets created shortages in everything from corn to copper to crude. As many as 5,000 merchants will gather in the British capital from October 3rd 2011 for London Metal Exchange week, an annual event during which supply contracts are discussed. Mr Robin Bhar an analyst at Credit Agricole SA in London who has followed the metals market for about 25 years said that “If you don’t have demand then you don’t need to talk about shortages. This is not a normal market. There is a lot of fear out there. At the moment people are panicking. When you panic, you don’t think rationally.” Quarter Century Copper which reached a record USD 10,190 on the London Metal Exchange in February sank to USD 6,800 on September 26th 2011, 14 month low. The contract traded at USD 7,067.50 taking this year’s decline to 26%. The metal is on track for its second worst year in almost a quarter century, exceeded only by 54% retreat in 2008. According to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, the Standard & Poor’s GSCI gauge of 24 commodities fell 5.6% this year, led by cotton, nickel and copper. The MSCI All Country Index of equities dropped 14%. Treasuries maturing in 10 years or more returned 25%. Copper consumption fell 0.9% in 2008 as the global economy contended with recession, driving supply into a surplus from a shortage, Morgan Stanley estimates. Global stockpiles in warehouses monitored by exchanges in London, New York and Shanghai expanded 15% to 650,851 tonnes since the start of January a sign that demand may be weakening. Inventories are about 50% higher than the average over the past five years. Consuming Nation This year’s gain in stockpiles still falls short of the expansions seen during the global recession when they rose 63% in 2008 and 78% in 2009. Monthly imports by China, the biggest consuming nation, rose 58% since reaching a 2 1/2-year low in May. According to the median of as many as 66 economists’ estimates compiled by Bloomberg, while China’s economic growth will slow to 9.3% this year from 10.4% in 2010, it will still be almost six times faster than the US. China accounts for about 38% of global copper demand compared with 8% for the US and 15% for Western Europe. The International Monetary Fund cut its global growth forecasts to 4 percent for this year and next on September 20 compared with earlier estimates of 4.3% for 2011 and 4.5% in 2012. That would still exceed the 5.2% contraction in gross domestic product that the World Bank estimates took place in 2009. Different Today Mr Herwig Schmidt head of sales at Triland Metals Limited said that so far in the real economy we’ve seen some caution and fewer orders. The exchange handles about 80% of global transactions in metals futures. But you don’t see the impact like we had seen in 2008 when suddenly 50% of all orders were canceled. It is different today. Goldman Sachs Group Inc’s team of commodity analysts said that prices will advance to a record USD 11,000 in 12 months as growth in emerging markets suggest tightening copper fundamentals. The bank is recommending investors buy the LME’s June 2012 contract.

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