A strong U.S. dollar and concerns that the global economic slowdown is spreading to China, the world’s leading consumer of copper, are driving the price of copper below US$1.80 per pound.
China's economic growth rate fell 1.1% from 10.1% in the second quarter to a current level of 9%, and factory output sank to a six-year low.
Major mining companies are reacting to the reduced demand and some are curtailing their production. Some are even being forced to temporarily shut down. Freeport-McMoRan Copper & Gold Inc. announced recently that it would reduce production if required due to current economic conditions.
Bloomberg reports on current copper prices:
Copper Tumbles Below $2 a Pound to Lowest Since December 2005
Copper tumbled below $2 a pound for the first time since December 2005 on speculation that the world economy is headed for a recession that will reduce demand for metals.
China, the biggest contributor to global growth, expanded at the slowest pace in five years in the third quarter, a report showed recently. U.S. lawmakers and officials moved toward forging a second fiscal-stimulus package to stem the economic decline. Before that point, copper had fallen 30% this year on signs of declining demand.
''It's very significant to see copper come under $2,'' said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``People are wondering, `How did it fall so far so fast?' It's easy. With this economy, it doesn't matter what the price is, people don't want copper.''
Copper futures for December delivery fell 10.9 cents, or 5.1%, to $2.0075 a pound at 9:57 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price dropped to $1.992, the lowest for a most-active contract since Dec. 21, 2005. The metal touched a record $4.2605 on May 5.
''Economic conditions have weakened dramatically in recent weeks and there is significant uncertainty about the near-term price outlook,'' Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly-traded copper miner, said recently in a statement.
Copper's slump ''is attributable to the fact that the global slowdown is now spreading to China,'' Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said in a report today.
Chinese gross-domestic product rose 9% in the third quarter from a year earlier, the weakest quarter since 2003, the statistics bureau said in Beijing yesterday. The Asian country is the world's biggest metals user.
On the London Metal Exchange, copper for delivery in three months dropped $250.75, or 5.3%, to $4,469 a metric tonne ($2.03 a pound).
China has been one of the central forces driving the commodities boom of recent years. Since China led it up, the once-booming economy of China could easily lead commodities right back down.
If markets forecast economic performance, China could be in for some rough times. The iShares China 25 (NYSE: FXI, Stock Forum), which tracks the 25 largest companies in China, is down 60% from a year ago. And there are no signs the downtrend is stopping any time soon.
The mighty growth engine of China has stalled and it’s going to take a while to get it started again and the markets are full of record volatility and uncertainty. And nothing will keep the bear growling more than uncertainty.
