Copper Falls to Four-Month Low on Higher Chinese Inventories

Discussion in 'Commodity Futures' started by Cdntrader, Nov 12, 2006.

  1. Copper Falls to Four-Month Low on Higher Chinese Inventories

    By Millie Munshi

    Nov. 10 (Bloomberg) -- Copper plunged to a four-month low, capping the biggest weekly decline since September, as higher inventories renewed speculation that demand may be slowing in China, the world's largest user of the metal.

    Stockpiles in warehouses monitored by the Shanghai Futures Exchange rose 15 percent this week and Chinese imports dropped 22 percent in the first 10 months of the year, the Beijing-based customs office said on its Web site Nov. 8. Surging demand from China helped send prices to a record high in May, and copper prices had quintupled since 2001.

    ``If China's demand doesn't come back roaring, there would be very few copper-hugging people out there,'' said Michael Widmer, head of metals research at Calyon in London.

    Copper futures for December delivery fell 17.9 cents, or 5.4 percent, to $3.13 a pound at 11:46 a.m. on the Comex division of the New York Mercantile Exchange, after reaching $3.117, the lowest since June 28. Prices are down 5.6 percent for the week, the third straight decline, and have fallen 23 percent from a record $4.04 on May 11.

    On the London Metal Exchange, copper for delivery in three months fell $395, or 5.4 percent, to $6,930 a metric ton ($3.143 a pound), the first time it has traded below $7,000 since June 29. Prices still are up 74 percent from a year ago.

    Copper will fall to $2.40 a pound next year and $1.65 in 2008, Merrill Lynch & Co. said today, reiterating an earlier forecast. Mine supply, which has been trailing demand during copper's rally, will exceed demand by 500,000 tons next year, Merrill said in its report.

    Rising Inventories

    Total inventory of copper at warehouses monitored by exchanges in London, New York and Shanghai jumped to 210,541 tons as of today, the highest since March 13.

    A slowing U.S. housing market also will dampen copper prices in the next year, Merrill said. Home construction fell last quarter at the fastest rate since 1991. Builders are the biggest buyers of copper, which is used in wire and pipe.

    ``We do not believe the worst of the U.S. housing cycle is behind us and the full impact of reduced demand for copper may not be felt until early-mid 2007,'' Merrill said in the report.

    A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

    To contact the reporters on this story: Millie Munshi in New York at