Sep 20, 2011 NEW YORK (Dow Jones)--A weaker global growth outlook from the International Monetary Fund and continued worries about a potential credit crunch in Europe pushed copper prices to their lowest levels in almost a year Tuesday.
The most actively traded copper contract, for December delivery, fell 5.7 cents, or 1.5%, to $3.7255 a pound on the Comex division of the New York Mercantile Exchange, the lowest ending price for a most-active contract since Sept. 28, 2010.
The IMF warned Tuesday that U.S. and European economies faced a recession and a "lost decade" of growth unless governments around the world act to reshape their economic policies. The fund cut its forecast for global growth in 2012 to 4%, from previous a growth expectation of 4.5%.
"Strong policies are urgently needed to improve the outlook and reduce the risks," IMF chief economist Olivier Blanchard said. "Policy makers don't have the luxury of time."
The gloomy outlook hit a copper market that was already on its heels from the view that Europe may be sliding toward a credit crisis. Futures slipped by more than 4% Monday.
Copper is sensitive to the growth outlook because of its widespread uses across industries. The metal is found in everything from wiring and plumbing to automobiles and consumer electronics.
"We're not seeing big purchasing growth," said Zachary Oxman, managing director with TrendMax. "I think we close the year lower than we are here."
Despite the worries about a renewed financial crisis in the developed world, copper isn't likely to see as steep a fall as 2008, when prices fell by more than 60% from their peak, analysts with Standard Chartered said in a research note Tuesday.
"There is a danger that problems in the financial markets will feed back through into the industrial economy, but there is limited evidence at this point of a major slowdown taking place," the analysts said.
Copper futures were also pressured Tuesday by a report that U.S. home construction in August fell to its lowest level in three months as the industry continued to drag on the world's largest economy. Construction of homes and apartments on the month fell 5% from July, to 571,000, the Commerce Department said. Economists had expected housing starts to stand at 590,000 on the month.
Also Tuesday, the International Copper Study Group said the world copper market was in deficit by 130,000 tons during the first six months of the year. Supply fell short of demand by 286,000 tons during the same period in 2010.
Supply was widely expected to fail to meet rising demand this year, with analysts generally forecasting a deficit on the year of between 300,000 tons and 600,000 tons.
Copper settlements (ranges include electronic and pit trading):
Sep $3.7165; down 5.50 cents; Range $3.7050-$3.8015
Dec $3.7255; down 5.70 cents; Range $3.7055-$3.8240