Dull day for base metals

Prices drop on demand concerns from China

Base metal prices dropped from their recent high levels on Thursday, 07 January 2010. Prices dropped as traders anticipated that recent monetary policy changes in China will curb the demand for the metals in coming months. The strong dollar also played its role.

At USA, copper futures for March delivery ended lower by 6.75 cents (1.9%) to 3.427 a pound. Prices fell for first time in nine sessions. Copper ended FY 2009 higher by 140%.

At LME, copper for delivery in three months ended lower by $125 (1.6%) at $7,535. 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 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 rose by almost 0.6%. China's central bank said on Wednesday that it aimed to keep inflation in check in 2010 while maintaining its pro-growth monetary policy as the world's third-largest economy recovers from the financial crisis.

Among economic data for the day, The Labor Department in US reported on Thursday, 07 January 2010 that the number of people filing initial claims for state unemployment benefits was essentially unchanged in the week of 2 January 2010 rising by just 1,000 to a seasonally adjusted 434,000.

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 5.75 (1.6%) at Rs 345.85/Kg. Prices rose to a high of Rs 352.75/Kg and fell to a low of Rs 345.5/Kg during the day's trading.

Among other metals traded in the LME on Thursday, lead lost 2.6% to end at $2,603 a ton and zinc lost 1.6% to end at $2,675 a ton. Nickel lost 0.5% to end at $19,050. Aluminium shed 1% to end at $2,355 a ton.