Copper tarnishes

Strong dollar hammers red metal price

Base metal prices ended lower on Wednesday, 03 February 2010. Prices fell as the dollar strengthened thereby reducing the appeal of commodities as an alternate investment.

At USA, copper futures for March delivery ended lower by 11.6 cents (3.7%) to $2.9735 a pound. This year, till date, copper is lower by 11.7%. Copper ended FY 2009 higher by 140%.

At LME, copper for delivery in three months ended lower by $225 (3.3%) at $6,590. 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.

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

Among economic data expected for the day, The Institute for Supply Management reported on Wednesday, 03 February 2010 that the service sector of the US economy moved back into growth territory in January 2010. The ISM nonmanufacturing index rose to 50.5% from 49.8% in December against an expected figure of 51.

Readings above 50% in the diffusion index indicate that activity at more firms is expanding than contracting. The index had been above 50% for two months in the fall but then slipped under that threshold in November and December. Only four industries reported growth, while 11 reported contraction.

A private sector job report also showed that US economy had shed the least number of jobs in January 2010 since the recession hit in 2007.

In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.5%.

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 12.1 (3.8%) at Rs 303.5/Kg. Prices rose to a high of Rs 319.45/Kg and fell to a low of Rs 301.25/Kg during the day's trading.

Among other metals traded in the LME on Wednesday, lead ended 4.5% lower at $2,021 a ton and zinc shed 1.1% to end at $2,086 a ton. Nickel rose 1.2% to end at $17,612. Aluminum shed 2% to end at $1,997 a ton