Sept. 23 (Bloomberg) –Copper dropped to the lowest in more than a year while nickel and tin plunged as the deepening European debt crisis and threat of a U.S. recession spurred investor concerns that demand for raw materials will slow.
Copper for delivery in three months fell as much as 7.3 percent to $7,115.75 per metric ton on the London Metal Exchange, the lowest price since August 2010, before trading at $7,329.75 a ton by 3:56 p.m. in Singapore. The metal has lost 16 percent this week, the most since October 2008. Tin plunged as much as 14.3 percent to $17,000 a ton and nickel by as much as 11 percent to $16,800 a ton.
The world is poised for a financial crisis, Mohamed El- Erian, chief executive officer of Pacific Investment Management Co., said in Washington yesterday. The Federal Reserve said Sept. 21 that there are "significant downside risks" in the U.S. economy, prompting the central bank to announce a $400 billion plan to spur growth as the recovery from the worst contraction since the Great Depression falters.
"Base metals are probably most sensitive to economic environment," Chae Un Soo, a trader at Korea Exchange Bank Futures Co., said by phone from Seoul. "China's PMI number came out pretty bad yesterday and now we have this Greek bank cut."
Manufacturing in China, the world's largest metals user, may shrink for a third month in September, according to a preliminary index of purchasing managers from HSBC Holdings Plc and Markit Economics released yesterday. National Bank of Greece SA, the country's biggest lender, and seven other Greek banks had their long-term deposit and senior debt ratings cut by Moody's Investors Service and carry a negative outlook.
"Sentiment is bearish, so we can expect some more selling pressure unless policy circuit breakers are enacted," analysts at Australia & New Zealand Banking Group Ltd. led by Mark Pervan said today in an e-mailed report. "There is no doubt that global growth has slowed, but a recession is still not our central expectation at this stage."
Copper has lost 28 percent from a Feb. 15 record, exceeding the 20 percent fall viewed by some investors as a signal of a bear market, on speculation that the global economy is slowing, reducing demand for the commodity used to make cables.
President Barack Obama yesterday urged "coordinated action" to prevent a return to recession as officials prepare to discuss the global outlook today at the annual meetings of the International Monetary Fund and World Bank in Washington.
G-20 officials said after talks they were "committed to a strong and coordinated international response to address the renewed challenges facing the global economy." The European Central Bank may act to address risks to growth as soon as next month should economic data disappoint, Governing Council member Luc Coene said.
"Despite some comments from the G-20, overall sentiment is pretty bearish and prices are more likely to extend declines for the time being," Korea Exchange Bank's Chae said.
Copper for December delivery fell 7.8 percent to $3.2150 per pound on the Comex in New York. On the Shanghai Futures Exchange, the December delivery contract dropped by the daily 6 percent limit to 56,940 yuan ($8,910) a ton.
Price declines "came from a broader macro-economic concern," Chen Xin Yi, an analyst at Barclays Capital in Singapore, said today by phone. "We have been advising clients not to take specific directional risks."
Zinc in London dropped 3.6 percent to $1,937.50 a ton, lead retreated 3.2 percent to $2,037 per ton and aluminum fell 1.2 percent to $2,201 per ton.