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Copper Futures Post Weekly Drop on Concern Demand May Stall
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By Millie Munshi and Chanyaporn Chanjaroen

Oct. 30 (Bloomberg) -- Copper prices fell, dropping 2.6 percent for the week, on concern that the economic recovery may slow, damping demand for the metal.

Spending by U.S. consumers slid in September from August, the first decline in five months, the Commerce Department said today. New-home sales dropped last month and consumer confidence slipped in October, reports showed this week. Yesterday, BHP Billiton Ltd., the world’s biggest mining company, said raw- material use is easing in China, the largest copper user.

“There is no real improvement in the demand situation,” said Gijsbert Groenewegen, a partner at New York-based hedge fund Gold Arrow Capital Management. “We’ve seen no recovery in construction in the U.S., and now China looks like it will be slowing down its buying. Even BHP is asking, ‘How sustainable is this?’”

Copper futures for December delivery dropped 7.4 cents, or 2.4 percent, to $2.9555 a pound on the New York Mercantile Exchange’s Comex division. The weekly decline halted three straight gains.

“China has been the major, and sometimes only, source of demand for commodities in the second half of 2009,” said Marius Kloppers, BHP’s chief executive officer. “Restocking in China is now essentially complete, and we are seeing signs of a pullback in demand.”

Shanghai Stockpiles

Copper prices have doubled this year as imports surged in China, the world’s biggest metal user. Stockpiles in warehouses monitored by the Shanghai Futures Exchange have climbed from a 2009 low in April, signaling consumption may be slowing. In the week through yesterday, inventories rose 7.1 percent to 102,835 metric tons, within 2 percent of last month’s a five-year high.

In New York, the most-active copper contract gained 4.8 percent this month, the ninth increase since December.

“Copper around this level is still high,” said David Wilson, an analyst at Societe Generale SA in London.

The dollar’s rally eroded the appeal of most commodities as alternative investments, helping to push the metal lower today. The Reuters/Jefferies CRB Index of 19 raw materials slid as much as 2.2 percent, heading for the steepest drop in almost six weeks, with declines in all the components except cotton.

The greenback surged toward its biggest weekly gain since June against a basket of six major currencies.

Copper climbed this month on speculation that reviving economic growth will boost industrial and construction demand.

Asian economies are “rebounding fast” from the global recession, the International Monetary Fund said yesterday. The U.S. economy, the world’s biggest, expanded in the third quarter for the first time since June 2008, government data showed yesterday. The U.S. is the world’s second-largest copper user.

On the London Metal Exchange, copper for delivery in three months dropped $184.50, or 2.8 percent, to $6,480 a ton ($2.94 a pound). Nickel, aluminum, lead, zinc and tin prices also declined in LME trading.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at [e-mail] Munshi in New York at [e-mail].
Last Updated: October 30, 2009 16:09 EDT