Bloomberg News

Copper, Nickel, Zinc Volatility Tumble to Decade-Year Low

February 20, 2013

Price swings in copper, nickel and zinc slid to the lowest levels in about a decade, a signal that rising supplies and a slowdown in China have kept investors away from the markets after a decade of high returns.

The 100-day historical volatility in three-month copper on the London Metal Exchange fell to 14.9 percent, the lowest since October 2003, from as much as 71.4 percent in February 2009, according to data compiled by Bloomberg. Swings in Standard & Poor’s GSCI gauge of 24 commodities dropped to 13.2 percent, the lowest in at least 10 years, from 56.9 percent in October 2009.

The falling volatility indicates investment opportunities may have dimmed after the LME index of six primary metals more than tripled in the 10 years to 2012. The “super cycle” of commodity price gains has ended as China’s economy shifts to slower growth and supplies increase, Citigroup Inc. said in a research report in November.

“This is something that should be expected when the global macroeconomic picture is less clear,” said Bonnie Liu, an analyst with Macquarie Group Ltd. “Metals aren’t favored when we’re in risk-off mode.”

The 100-day historical volatility in LME three-month zinc fell to 18.8 percent, the lowest since October 2003. The gauge advanced to as much as from as 60.9 percent in November 2008. That of nickel dropped to 21.5 percent on Feb. 15, the lowest in at least 10 years.

The Standard & Poor’s GSCI gauge of 24 commodities gained 0.3 percent last year, and closed at 675.63 yesterday after surging to 893.86 in July 2008. Copper climbed to a record $10,190 a metric ton on Feb. 15, 2011, and was at $8,071 a ton at 4:14 p.m. in Shanghai.

“The market is moving into a surplus from deficit, and it probably won’t return to the record level,” Liu said.

The 100-day historical volatility in three-month tin fell to 21.9 percent yesterday, while that of lead dropped to 21.2 percent on Feb. 15, both were the lowest since July 2005.

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net


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