Copper dips on growth woes, lower demand

MUMBAI: Copper failed to recover even as stockpiles fell in Shanghai past week. All industrial metals have been under pressure since early October when the market started to factor in the possibility that China may not be able to offset the falling demand from the US, where slowdown is accelerating.

According to MAPE Admisi Commodity Research, “Copper is witnessing a consolidation period due to potential slowdown in US economy and declining Chinese appetite.” Three-month copper forward on London Metal Exchange (LME) was $6,855 per tonne and on MCX the February futures fell to Rs 272.65 per kg. The physical offtake is low in India.

Sharad Parikh from Bombay Metal Exchange said, “The industrial buying for copper is sustaining the market. Individual traders are staying away from the copper market.” Copper is also very volatile, and does not indicate any clear direction, he said.

Shanghai copper stocks fell 6,836 tonne past week, a 20% fall. Stocks are down 70% since June to 27,602 tonne, equivalent to about 2.5 days of China’s consumption, according to reports. Falling inventories in the fourth quarter of 2007 and potential demand in first quarter of 2008 were likely to boost prices. On Monday LME Copper stockpile had also fallen by 275 tonne to remain at 1,88,475 tonne.

Copper slipped in early European trade on Monday, with investors reluctant to make big bets ahead of a rate decision by the US Federal Reserve on Tuesday. Signs of weakening demand from China, the world’s top consumer of the metal, global financial markets prone to bad news on credit losses have weighed on industrial metals.

A revival in industrial metals copper and aluminium is expected, whereas consolidation in zinc, nickel and lead could continue for a while. According to International Copper Study Group (ICSG), 2008 holds good prospects for copper with expected surplus to the tune of 250,000 tonne against a shrinking surplus in 2007.