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Copper Drops Most in Two Months Following Declines in Equities

By Claudia Carpenter

Jan. 21 (Bloomberg) -- Copper fell the most in two months in London, leading other industrial metals lower, as slumping equity markets may signal an extended drop in demand.

Copper has declined 22 percent from a record $8,800 a ton in May 2006 on higher output and weaker demand in the U.S. and Europe. The Morgan Stanley Capital International Index dropped for a fifth day and Europe's Dow Jones Stoxx 600 Index fell the most since the Sept. 11 terrorist attacks.

``Most of the pressure on copper will be negative over the next six to 12 months,'' said Andrew Keen, an analyst at Sanford C. Bernstein Ltd. in London. ``You still have mine supply growth coming through and you've still got some weakness in demand in the U.S. and Europe.''

Copper for delivery in three months fell $266, or 3.7 percent, to $6,875 a metric ton as of 5:01 p.m. on the London Metal Exchange, the biggest drop since Nov. 21 and narrowing this year's gain to 3 percent. New York futures decreased 4 percent in electronic trading.

Today's drop ``highlights the risk that we are heading back to the $6,400/$6,300 range lows in the near term,'' Robin Wilkin, London-based head of commodities and currency technical analysis at JPMorgan Chase & Co., wrote in an e-mailed report today.

Prices will probably average $6,600 a ton this year, down 7 percent from last year's $7,100, Keen said.

``The contagion effects of financial market dislocation and downgrades to U.S. growth are in our view most relevant for the metals and energy sectors,'' Deutsche Bank London-based analyst Jude Brhanavan wrote in an e-mailed report today.

Rising Stockpiles

Copper slid in each of the past three U.S. recessions, and prices may drop about 8 percent by the end of this year, according to BNP Paribas SA, France's largest bank.

Aluminum, tin and zinc declined after stockpiles increased. Aluminum inventories jumped 2,025 tons to 949,475 tons, according to the LME's daily warehouse report, the highest since June 2004. Daily production increased to an average 69,700 tons in December from 69,300 tons in November, the International Aluminium Institute said today.

The metal's three-month delivery contract slid $38, or 1.6 percent, to $2,412 and earlier fell to $2,408, the lowest since Jan. 2. Prices may average 11 percent lower this year at $2,361 a ton, after falling 14 percent in 2007, CRU International Ltd. researcher Wan Ling said in Shanghai on Jan. 19.

Tin stockpiles rose $5 to $12,015 tons. The contract declined $380 to $16,070.

Zinc inventories climbed 1,025 tons to 105,500 tons, the highest since April 11. The zinc price dropped $120 to $2,235 a ton.

Nickel fell $1,025, or 3.6 percent, to $27,750 a ton and lead decreased $90 to $2,500.

Following are technical gauges for copper:



20-day moving average 6,963
100-day moving average 7,308
200-day moving average 7,462
14-day relative strength index 46.60

Fibonacci Start End 50% 38.2%
6,317 7,969 7,143 6,948
To contact the reporter on this story:
Claudia Carpenter in London at
[email protected] or [email protected].