BLBG: Copper Falls in London on Concern Recent Gains Were Excessive
By Anna Stablum
July 16 (Bloomberg) -- Copper fell from the highest price in more than a month in London as slumping confidence in the world economy fanned concern that recent gains were excessive.
Confidence in the global economy dropped for the first time in four months in July as government stimulus efforts showed little sign of reducing job losses, a Bloomberg survey showed. That helped to pull prices lower even after China, the world’s biggest copper user, reported second-quarter economic growth that topped economists’ estimates.
“People bought on anticipation of the very solid numbers in China,” Alex Heath, head of industrial-metals trading at RBC Capital Markets in London, said by phone today. “It all got a bit ahead of itself.”
Copper for three-month delivery slid $76.25, or 1.5 percent, to $5,183.75 a metric ton at 10:08 a.m. on the London Metal Exchange. Yesterday the contract rose as high as $5,284, the highest since June 12. Copper for September delivery dropped 1.2 percent to $2.3625 a pound on the New York Mercantile Exchange’s Comex division.
The outlook for prices depends on “how quickly the rest of the world pulls out of the recessionary period,” Heath said.
China’s gross domestic product expanded by 7.9 percent in the second quarter, beating the 7.8 percent median forecast of 20 economists in a Bloomberg survey, as the nation became the first major economy to rebound from the global recession. At the same time, though, the Bloomberg Professional Global Confidence Index declined to 39.13 in July from 43.57 in June.
Chinese Imports
Copper has advanced 69 percent this year in London, bolstered by demand from China, where imports of the metal and related products climbed to a record 475,999 tons in June. Industrial output in the country rose 10.7 percent in June from a year earlier, the National Bureau of Statistics said today.
“Much of the increase in imports has been driven by restocking, as opposed to stockpiling, following sizable declines in inventories in 2007 and 2008,” Tim Bond, head of global asset allocation at Barclays Capital, said in a report. “With older-economy industrial production starting to recover, any commodity correction is likely to be shallow and short- lived.”
The copper market moved into so-called backwardation this week for the first time since May 1 as metal for nearby delivery traded at a premium to three-month copper, indicating scarce supplies. The spread narrowed to $11.50 yesterday from $21 on the previous day.
Aluminum Slips
Inventories of copper in warehouses monitored by the LME slipped to 260,875 tons today, the seventh decline in eight sessions. Stockpiles have shrunk 52 percent from their peak on Feb. 25.
Among other LME metals for three-month delivery, aluminum slipped 0.7 percent to $1,644 a ton. The lightweight metal, used in transportation, power and packaging, rose yesterday as high as $1,665 a ton, the highest since July 2.
“Aluminum prices bottomed in February and are headed toward $1,900-$2,000 per ton before the end of the year and even as soon as September,” Laredo, Texas-based researcher HARBOR Intelligence said in a report yesterday. Higher energy prices, a falling dollar, revived physical demand and further positive economic data probably will keep buoying prices, it said.
Tin dropped 1.9 percent to $13,050 a ton after the premium for near-month delivery surged to $160 a ton yesterday, up 68 percent this week. Nickel fell 1 percent to $15,777 a ton, lead dropped 2.3 percent to $1,597 a ton, and zinc shed 2 percent to $1,512 a ton.
To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net
