Base metals falter

Prices trip on concerns of economic slowdown

Base metal prices ended substantially lower at Comex on Tuesday, 04 May 2010. Prices fell on concern that demand will falter after manufacturing in China expanded at the slowest pace in six months. Prices also fell in tandem with US equities. U.S. stocks fell sharply on Tuesday as concerns over Greece's bailout package and Europe's national debts weighed on sentiment and as dollar once again climbed up against the euro.

At USA, copper futures for July delivery ended lower by 11.5 cents (3.5%) at $3.1785 a pound on Tuesday. Last week, prices lost 5%. In April, copper lost 6.1%. Copper gained about 6% for the first quarter, buoyed by data from the U.S. and other countries reinforced expectations that the global economic recovery was on track. On a year to date basis, in 2010, copper is lower by 5.5%.

On Tuesday, at LME, copper for delivery in three months ended lower by $404 (5.4%) at $7,025.5. Prices had crossed the $8,000 mark for first time since 2008 on 6 April. On 3 July, 2008, prices had touched an all time intra day high of $8,940.

Prices have increased by almost 67% in the past twelve months due to higher imports from China. Copper ended FY 2009 higher by 140%.

A bailout package worth some $146 billion for Greece was announced over the weekend, but it was not enough to restore investors' confidence about the euro-zone countries and the euro and investors again sought gold as a hedge against currency fears.

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against basket of six other currencies rose by 1.2%. The dollar is up some 6.7% for the year.

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

A purchasing managers' index for China released today by HSBC Holdings Plc and Markit Economics slid to 55.4, the lowest level since October.

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.

At the MCX, copper for June delivery closed lower by Rs 8.35 (2.6%) at Rs 316.75/Kg. Prices rose to a high of Rs 327.4/Kg and fell to a low of Rs 315/Kg during the day's trading.

Among other metals traded in the LME on Tuesday, lead ended 7.6% lower at $2,060 a ton and zinc ended 6% lower at $2,167 a ton. Nickel ended 6.3% lower at $24,650. Aluminum ended 5.8% lower at $2,153 a ton.