Copper Heads for Longest Slump in 27 Years on Factory Outlook

Feb 04, 2014 2:39 am ET

Feb. 4 (Bloomberg) -- Copper dropped for a 10th day, heading for the longest losing streak since at least April 1986, on signs of weakening demand after manufacturing slowed in China and the U.S., the world’s top metals consumers.

The metal for delivery in three months on the London Metal Exchange slid as much as 0.3 percent to $7,016 a metric ton, the lowest intraday level since Dec. 4, and was at $7,030.50 at 4:28 p.m. in Tokyo. Prices have lost 4.3 percent in this run of declines.

Factories in the U.S. expanded in January at the weakest pace in eight months, and a measure of orders declined by the most since December 1980, data from the Institute for Supply Management showed yesterday. In China, a purchasing managers’ index fell to a six-month low last month as orders slowed.

“The market has been hurt by China for a couple of weeks now,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “And then you have the anemic U.S. number, and there’s also a big production surplus. From the standpoint of the supply-demand equation, it’s still leaning to the bearish side.”

Copper in London has slumped 15 percent in the past 12 months, partly as economic growth eased in China. Global supply will exceed demand by 385,000 tons this year, after a 45,000 ton surplus in 2013, and prices will “grind lower,” Goldman Sachs Group Inc. said in a report Jan. 31.

China Stockpiles

About $2.9 trillion has been erased from the value of global equities this year as China’s economy slowed and the Federal Reserve further cut stimulus on Jan. 29. Copper stockpiles monitored by the Shanghai Futures Exchange jumped 18 percent last month, the first increase since October. The LMEX Index of the six main metals traded on the bourse fell 3.7 percent last month, the worst start to a year since 2010.

Motor vehicle sales in the U.S. slowed to an annualized rate of 15.16 million, the weakest in three months, according to data from Ward’s Automotive Group.

“China’s week-long holiday has made things worse for copper by reducing liquidity,” said Kazuhiko Saito, an analyst at Fujitomi Co., a commodities broker in Tokyo. “We may see copper test $7,000 before the Chinese return later this week.”

Markets in China are closed through Feb. 6 for Lunar New Year holidays. Copper for March delivery was little changed at $3.1855 a pound on the Comex in New York.

Aluminum in London rose 0.2 percent to $1,681 a ton, snapping an 11-day losing streak. It touched $1,671.25 yesterday, the lowest intraday level since July 2009. The 14-day relative-strength index fell below 30 yesterday, a level that suggests to some analysts using technical charts that the price may be poised to rebound.

Zinc in London fell 0.5 percent, extending its run of declines to 10 days, the longest string of losses since at least January 1989.

On the LME, tin and nickel also declined, while lead was little changed.

--With assistance from Luzi Ann Javier in New York. Editors: Sungwoo Park, Brett Miller