Intl Copper Assoc takes price concern to LME, UK regulator Source: Dow Jones
Copper Board Copper CatalogThe International Wrought Copper Council, or IWCC, said Friday it has lodged concerns about inflated copper prices with the London Metal Exchange and the Financial Services Authority.
The IWCC, the international trade association for the copper and copper alloy fabricating industries, said the industry was suffering badly from the current high price of copper, as large volumes of speculative money moving into the market increasingly divorce the price from fundamentals.
"We recognize that the LME price of copper is what it is, but this market, where speculators can buy what does not exist, is doing serious damage to our industry and will bring into question whether the LME copper price should continue to be the recognized reference price for our industry," said Thierry Centner, chairman of the IWCC.
LME copper prices have trebled from less than $2,000 a metric ton to a record $6,000/ton in three years, with prices doubling in the last year, putting "extreme pressure on working capital and threatening the survival of some companies and the use of copper in some key applications," the IWCC said.
"Large volumes of speculative money are feeding on this situation, taking advantage of the forward trading facilities of the metal exchanges to drive copper prices up and up. This investment or speculative activity has come to dominate the market, tending to divorce it from its industrial base," the statement added.
An LME spokesman said the exchange was in continual conversation with market users to provide a transparent market place.
Demand in China has boosted copper prices The price of copper has risen to nearly $7,000 a tonne on the back of strong demand and worries over supply. Copper was up $110 on Friday's close to $6,940 a tonne in early Monday trade.
The rise in metal prices, including copper which is used in construction and electronics, has been prompted by growing demand from developing nations.
Copper prices also rose following concerns that supplies could be disrupted by strike action in mines in Mexico and Chile.
All metals 'precious'
Strong demand from China, combined with a lack of investment in new mining projects, has caused surge in commodity prices.
The rise in copper follows peaks in recent weeks in silver, gold and other metals.
"The evidence is the underlying trend is very strong" said Peter Richardson, chief metals economist at Deutsche Bank. "All metals are becoming precious," he added.
The price of copper has risen by 57% this year and has increased nearly five-fold from when it was under $1,400 a tonne in November 2001.
The rise in commodities has prompted investment banks to launch many new funds that specialise exclusively in metals and oil.
Shanghai copper futures hit a record high, with May contracts hitting $7,794 a tonne.
The price of zinc, which is used as an anti-corrosive coating in steel production, has been particularly strong this year, increasing by 76% due to increased demand from the steel sector.
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