Bloomberg News

Copper Drops as Europe Debt Concern Worsens Demand Outlook

September 06, 2011

Sept. 6 (Bloomberg) -- Copper futures declined amid concern that the euro-zone nations will be unable to control the sovereign-debt crisis, damping the outlook for the global economy and curb demand for raw materials.

Three-month copper on the London Metal Exchange dropped as much as 1 percent to $8,870 a metric ton, the lowest intra-day level since Aug. 25, and traded at $8,890.25 as of 3:32 p.m. Seoul time. December-delivery copper on the Comex in New York dropped 2.4 percent to $4.0275 a pound.

The cost of insuring against default on European sovereign and financial debt surged to records yesterday. Finance ministers from Germany, Finland and the Netherlands will meet today to discuss a Finnish demand for collateral in a bailout for Greece, while the Italian Senate will debate the nation’s austerity plan amid a strike called by the nation’s biggest union. China’s services activity slowed in August, according to a statement issued by HSBC Holdings Plc and Markit Economics.

“The economic outlook is really weak,” David Thurtell, head of metals research at Citigroup Inc. said by phone from Sydney today. “There’s not a lot to be bullish about base metals in the near term.”

Citigroup yesterday lowered its 2011 copper price forecast by 6.2 percent to $9,099 a ton and nickel by almost 14 percent, citing the bank’s reduced economic growth forecast for the U.S., the euro zone and India. Copper, used in power cables and construction, has lost 13 percent from a record $10,190 touched on Feb. 15.

Falling Production

Still, tight supplies amid falling production and mine strikes will support copper, Australia and New Zealand Banking Group Ltd. analysts Mark Pervan and Natalie Robertson said today in a report.

Copper output in Chile, the world’s biggest producer of the metal, is poised to decline this year after snowstorms and strikes hit mines owned by BHP Billiton Ltd. and Codelco, Mining Minister Hernan de Solminihac said yesterday in Sydney. Chilean output fell 2.2 percent in the first half to 2.57 million metric tons. The nation produced 5.42 million tons last year.

Workers at Freeport-McMoRan Copper & Gold Inc.’s Grasberg mine in Indoensia may hold another strike from Sept. 15 if the company fails to make a new offer on wage increases, Virgo Solossa, head of organizational affairs at the mine’s labor union said yesterday. Grasberg’s copper production at the mine fell to 1.22 billion pounds (553.4 million kilograms) last year from 1.41 billion pounds in 2009, according to the website.

Copper for November delivery on the Shanghai Futures Exchange dropped as much as 1.2 percent to 66,330 yuan ($10,380) a ton, the lowest price since Aug. 23, and last traded at 66,470 yuan.

Three-month delivery aluminum in London fell 0.6 percent to $2,372.75 a ton and nickel lost 0.9 percent to $20,700. Lead declined 1.4 percent to $2,402 and zinc was down 0.2 percent to $2,168 a ton. Tin decreased 1.5 percent to $23,601 a ton.

--With assistance from Sungwoo Park in Seoul, Matthew Craze in Santiago and Shraysi Tandon in Sydney. Editors: Richard Dobson, Ovais Subhani

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at

To contact the editor responsible for this story: Richard Dobson at

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