Sept. 22 (Bloomberg) –Copper tumbled into a so-called bear market, slumping for a fifth day, after the Federal Reserve said that the U.S. economy faces "significant downside risks," eroding prospects for industrial-metals demand.
The three-month contract on the London Metal Exchange declined as much as 3.6 percent to $8,005.25 per metric ton, the lowest price since Nov. 17. That's 21 percent below the record $10,190 a ton set on Feb. 15, more than the 20 percent drop that's regarded by some investors as signaling a bear market. The metal traded at $8,027.75 as of 4:42 p.m. Tokyo time.
Asian stocks dropped as a plan by the Fed to buy more long- term bonds failed to lift investor confidence. Policy makers said yesterday that they will replace much of the short-term debt in their portfolio with longer-term Treasuries in an effort to keep the economy from relapsing into a recession.
"My fears for a world slowdown are playing out, and as a barometer of the pace of the world industrial production cycle, the copper price is falling," said David Thurtell, an analyst at Citigroup Inc. in Singapore.
The Standard & Poor's 500 Index lost 2.9 percent yesterday and the Standard & Poor's GSCI Index of 24 commodity futures declined as much as 1.9 percent to 626.31 today, the lowest level since Aug. 19.
Copper has slumped as concerns that the global economy is slowing outweighed a shortfall in the metal used to make cables. The world economy will expand 4 percent this year and in 2012, the International Monetary Fund said on Sept. 20, cutting June forecasts of 4.3 percent for 2011 and 4.5 percent for next year.
A China manufacturing index was 49.4 for September, according to a preliminary reading of the Purchasing Managers' Index reported by HSBC Holdings Plc and Markit Economics today. That compares with a final reading for August of 49.9. A number below 50 indicates contraction.
"It's not bullish," Thurtell said, referring to the data. "China is the commodity world's only remaining crutch."
Still, the global market will see a deficit of about 200,000 to 300,000 tons in 2011, Tiberius Asset Management AG said in a Sept. 15 report. Mine production has stagnated and given strikes in Chile and Peru, "there seems little prospect for improvement in the second half," Tiberius wrote.
Refined-copper imports by China, the largest user, gained for a third month in August on increasing arbitrage trade between London and Shanghai amid low domestic stockpiles. Imports rose 21 percent to 235,509 tons last month from 194,280 tons in July, according to the General Administration of Customs.
"The copper market is incredibly tight though, and vulnerable to further strikes and operational problems," Citigroup's Thurtell said. "Chinese consumers are short of material and should provide strong buying support from here."
In China, copper for December delivery slumped as much as 5.7 percent to 59,370 yuan ($9,289) a ton on the Shanghai Futures Exchange before closing at 60,260 yuan.
Aluminum fell 1.1 percent to $2,292 a ton in London, zinc dropped 2 percent at $2,034.25 a ton and tin slumped 5.3 percent to $20,505 per ton. Lead was down 1.2 percent at $2,192.75 per ton and nickel tumbled 2.5 percent to $19,900 per ton.
Nickel earlier touched $19,750, the lowest level since July 2010 and tin dipped to $20,000, the lowest since August 2010.