Copper tumbled the most in almost six years to
below $5,400 a metric tonne as speculation that demand will not copy with a supply
glut. A sell-off in industrial metals has begun. The World Bank Dec 2014
average for copper was $6446 per tonne.
Copper for delivery in three months on the London
Metal Exchange dropped as much as $506.75 a metric tonne to $5,353.25, the
lowest intraday price since July 2009. The metal was trading 6.3 percent lower
at $5,492.75 a tonne.
Copper slumped as much as 8.7 percent in London and
fell to the daily trading limit in Shanghai.
Demand for the metal in China, the world’s biggest user, is forecast to slow
this year while supply rises globally. All other metals on the LME declined on
14 January, with nickel dropping to the weakest since February 2014.
Commodities have collapsed to the lowest level in
more than 12 years, led by a rout in energy prices, after a decade-long bull
market led companies to boost production and a stronger dollar diminished their
allure to investors. Oil’s 60 percent decline since last year’s peak is
reducing energy costs for mining companies to unleash bearish trend. Copper is
the worst performing non-energy raw material since August 2002.
Copper is falling faster than most other
commodities because “it’s the one that is played by the macro investors and by
people who are looking at the broader picture rather than commodity fundamentals.”
The slump in commodities prices is lowering
expectations for inflation around the world, raising the prospect of falling
consumer prices and tempering speculation that central banks will start raising
interest rates.
Copper’s slide also dragged down shares of metal
producers while boosting manufacturers and utilities. Jiangxi Copper Co. (358), China’s largest
producer, dropped 4.4 percent in Hong Kong while BHP Billiton Ltd., the world’s
biggest miner, slid to an almost six-year low in Sydney. Electricity generator Huadian Power International Corp. (1071) surged 7.4 percent in Hong Kong.
Inventories of the metal monitored by major
exchanges in London, New York and Shanghai have climbed 4.5 percent since the
start of the year and are up 29 percent since June, when they dropped to the
lowest in more than five years.
Refined production will exceed demand this year by
221,000 tons, widening from 59,000 tons in 2014, Gayle Berry, an analyst at
Jefferies Bache Ltd., said in a Jan. 7 report. About 1.6 million tons of new
mine supply of the metal may come online in 2015, Bloomberg Intelligence said
last month.
London-traded Brent crude slid to the weakest since
March 2009 yesterday and extended losses to $46.08 a barrel on the ICE Futures
Europe exchange on 14 January. The decline will help cut costs to produce and
transport metals, according to Natixis SA. Energy makes up about 25 percent of
copper mining costs, CRU estimates.
Investors last week doubled bets on more losses in
copper, already the worst-performing industrial metal in the past year after
plunging 24 percent. Investors increased the net-short position in copper to
10,881 Comex contracts in the week ended Jan. 6, compared with 4,455 a week
earlier, according to Commodity Futures Trading Commission data.