Copper drops on demand concerns

Weak retail sales data in US hammers red metal price

Base metal prices continued to drop on Thursday, 14 January 2010. Prices fell following disappointing batch of economic data spurring concerns about demand for metals in coming months.

At USA, copper futures for March delivery ended lower by 1.25 cents (0.4%) to 3.3875 a pound. Earlier during the day, prices rose by 1.3%. Last week, copper ended higher by 1.6%. This year, till date, copper is lower by 1.3%. Copper ended FY 2009 higher by 140%.

At LME, copper for delivery in three months was almost unchanged at $7,490. On 3 July, 2008, prices had touched an all time intra day high of $8,940.

Copper ended substantially higher last year on expectations of revived global economic growth along with a decline in the dollar. The dollar index had dropped almost 4.2% last year. The metal was also pushed higher by record first-half imports to China, the world's largest user.

In the currency market on Thursday, the dollar index, which weighs the strength of dollar against the basket of six other currencies erased earlier gains and fell by almost 0.1%.

The Commerce Department in US reported on Thursday, 14 January 2010 that U.S. retail sales was disappointing in December, falling a seasonally adjusted 0.3% on widespread weakness across different kinds of stores. The decline was unexpected. Market was forecasting a 0.5% gain.

Separately, the Labor Department in US reported on Thursday, 14 January 2010 that first-time jobless claims rose last week by the largest amount in five weeks. Initial claims rose by 11,000 to 444,000 in the week ended 9 January 2010. This was the highest level since mid-December.

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

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.

At the MCX, copper for February delivery closed lower by Rs 0.3 (0.08%) at Rs 341.6/Kg. Prices rose to a high of Rs 346.25/Kg and fell to a low of Rs 340.9/Kg during the day's trading.

Among other metals traded in the LME on Thursday, lead dropped 0.8% to end at $2,460 a ton and zinc gained 0.8% to end at $2,508 a ton. Nickel was little changed at $18,304. Aluminium advanced 1.3% to end at $2,324 a ton.