Copper heads for first drop in three years

[miningmx.com] — COPPER is headed for its first annual drop in three years after slowing global growth sparked by the euro zone debt crisis heightened worries that demand growth for the industrial metal may falter.

Prices are down 22% this year on concerns the economic slowdown will crimp usage, following a 30% increase in 2010 and a 140% jump in 2009.

“The fear of a US recession in the middle of this year subsequently turned into fears of a euro zone slump,” said Ang Kok Heng, who helps manage about $400m as chief
investment officer at Phillip Capital Management in Kuala Lumpur.

“The euro zone trouble cannot be resolved immediately, and we can only hope it’s contained next year.”

However, three-month copper on the London Metal Exchange snapped two days of declines and climbed 1.02% to $7,500.75 a tonne by 04:17 GMT on Friday as signs of improvement in the US economy offset worries about the euro zone and
encouraged investors to increase bets on riskier assets.

The most-traded March copper contract on the Shanghai Futures Exchange gained 1.68% to 55,130 yuan ($8,700) a tonne.

Europe’s sovereign debt crisis has tempered demand for manufactured goods from China and the rest of the world, sending commodities lower this year. The 19-commodity Thomson Reuters-Jefferies CRB index has lost 8.5% this year.

China’s vast factory sector shrank again in December as demand at home and abroad slackened, a purchasing managers’ survey showed on Friday.

LME copper will rise to $7,689 per tonne as a rebound from the Dec. 15 low of $7,131 has extended, according to Reuters technical analyst Wang Tao.

The dollar index retreated from a one-year peak of 80.854 to 80.410 and the euro bounced off a 15-month low of $1.2856 to $1.2951.

The euro clung to modest overnight gains in Asia on Friday, having been buoyed by a wave of short covering after an attempt on the downside fizzled out.