BASE METALS: Copper Hits 14-Month Low On Continued Growth Worry

Copper fell to 14-month lows Monday, as the view that a potential slowdown in global growth will slash metals demand outweighed the support from traders who viewed the market's 17% slide last week as an opportunity to buy.

The most actively traded copper contract, for December delivery, fell 3.4 cents, or 1%, to $3.246 a pound on the Comex division of the New York Mercantile Exchange.

Futures Friday ended at the lowest settlement price since August 2010, as waves of selling spread across metals markets. Speculative investors, who as recently as July had been overwhelmingly bullish on the prospects for copper, began to bet that demand for industrial metals in particular would fall as the European and U.S. economies struggle.

Worries mounted in recent weeks that Europe would be unable to prevent a default-spurred credit crunch, and downbeat economic outlooks by the Federal Reserve and International Monetary Fund pressured growth-sensitive assets.

"Metals are not only being buffeted by the (EU sovereign debt) headwinds, but seem to be under additional pressure on increasing signs of a deteriorating global macro picture" likely to limit metals demand, MF Global analyst Edward Meir said in a note.

Copper is vulnerable to such shifts in the growth outlook because of its widespread uses across industries, from housing and auto manufacturing to consumer electronics.

Copper early Monday continued its steep decline, and the selling reached fever pitch between about 1 a.m. and 2:15 a.m. EDT, pushing Shanghai futures to their exchange-limited decline of 7%. London and New York benchmarks fell by a similar amount, with the most-active Comex contract hitting its lowest level since July 2010.

Prices grinded higher afterward, as the declines drew some opportunistic buyers and firmer European equities brightened sentiment, opening New York trading near the unchanged mark before giving up some of that ground.

"These are not markets for the faint of heart," traders at RBC Capital Markets said in a note. "Whether this is finally the bottom we've all been looking for remains to be seen."

CME Group Inc. (CME), operator of the Comex, said Friday it would increase collateral requirements to trade benchmark copper futures by 18%. The increase takes effect at the close of business Monday, the exchange operator said.

Following the change, speculative investors will be required to post $6,750 to open a futures contract and $5,000 to hold it overnight.

-By Matt Day, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com

CME (NASDAQ:CME)
Historical Stock Chart
From May 2024 to Jun 2024