Copper slips

Rising LME inventories hammer copper prices

Copper prices dropped for first time in three weeks on Wednesday, 23 September, 2009 at Comex and LME. Prices fell today as inventories soared at LME.

At USA, copper futures for December delivery slid 5.65 cents (2%) to 2.808 a pound. Copper fell 2.6% last week. Copper ended August, 2009, higher by 7%.

On the London Metal Exchange, copper for delivery in three months ended lower by $142 (2.3%) at $6,128 a metric ton. On 3 July, 2008, prices had touched an all time intra day high of $8,940.

After August, it was the eighth straight monthly gain for copper. Prices gained 23% in the second quarter. On a year to date basis, prices are higher by 92.7%.

The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%.

As per latest reports, copper stockpiles in warehouses monitored by the London Metal Exchange increased 175 metric tons to 331,950 metric tons. LME supplies gained for 17 straight sessions before slipping yesterday.

In the currency market on Wednesday, the dollar erased early gains. The dollar index, which measures the strength of dollar against a basket of other currencies, fell by almost 0.2%.

In a statement released after a two-day policy meeting, the Fed kept its target for its federal funds rate set at a range of zero to 0.25%. It also announced that it has extended its purchase of mortgage-backed securities and agency debt into the first quarter of 2010 from December. In the statement, Fed officials said that economic activity has picked up with improved conditions in financial markets. Lower interest rates tend to hurt the dollar and boost gold's value as a hedge against a weak currency and inflation.

At the MCX, copper for November delivery closed at Rs 299.2/Kg. The closing price was Rs 4.9/Kg (1.61%) lower than previous closing price. Prices rose to a high of Rs 304.1/ Kg and fell to a low of Rs 294.65/Kg during the day's trading.

In FY 2008, copper prices dropped by 54%. Prior to 2008, copper prices ended FY 2007 with a gain of mere 5.5% after a whopping 44% gain in FY 2006. The price of copper gained every year since 2002 as global economic growth boosted demand for the metal used in pipes and wires.

Among other metals traded in the LME on Wednesday, lead fell 0.2% to $2,285 a ton and zinc fell 0.9% to end at $1,928 a ton. Nickel rose 0.3% to end at $17,800. Aluminium added 0.6% to $1,900 a ton.