Copper Tumbles Most in Four Months on Dollar, Economic Outlook

LONDON, June 23  -- Copper prices tumbled the most in four months as a stronger dollar curbed demand for commodities and the World Bank forecast a deeper global recession than estimated earlier.

    The U.S. Dollar Index, a six-currency gauge of the greenback's value, advanced as much as 0.8 percent, making dollar-priced raw materials more expensive for overseas buyers. The global economy will contract 2.9 percent in 2009, more than its March forecast for a 1.7 percent decline, according to a World Bank statement today.

    "There's a lot of dollar-related selling today," said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis. "There's also talk that demand may start to slow" as growth stalls, he said.

    Copper futures for September delivery plunged 11.75 cents, or 5.2 percent, to $2.144 a pound on the New York Mercantile Exchange's Comex division. That marks the biggest drop for a most-active contract since Feb. 17. Earlier, the metal touched $2.138, the lowest since May 29.

    "The economic recovery will come, but not as soon as many had expected," Eugen Weinberg, a Commerzbank AG analyst, said by telephone from Frankfurt. "The World Bank report added fuel to negative sentiment."

    The global economy may expand by 2 percent next year and by 3.2 percent in 2011, the World Bank said. In March, the Washington-based lender forecast 2010 growth at 2.3 percent.

    China Drives Demand

    Copper still has surged 52 percent this year, making it the second-best performer in the Reuters/Jefferies CRB Index of 19 raw materials. Only gasoline futures outperformed copper on the CRB index. Record refined-copper imports by China, the world's largest user of the metal, drove much of the increase.

    The world's most-populous nation imported 337,230 metric tons of refined copper in May, 6 percent more than in April and a record monthly total, government data show. Stockpiles monitored by the Shanghai Futures Exchange soared 13 percent last week to 68,536 tons as of June 18, the highest since August 2007, exchange data show. The jump in inventories may signal that demand is declining, analysts said.

    "A potential slowdown in Chinese import buying is, in our view, the single-biggest risk to metals prices," Barclays Capital analysts including Gayle Berry and Suki Cooper said today in an e-mailed report. "There are already some signals that Chinese demand is beginning to ebb."

    Copper stockpiles in warehouses certified by the London Metal Exchange fell 1 percent to 277,600 tons today, a seven- month low, an LME report shows. The drop in stockpiles may help cap today's declines, Capitol Commodity's Cohen said.

    Short Positions Decline

    Hedge-fund managers and other large speculators trimmed their net-short position in New York copper futures, or bets that prices will fall, by 1.6 percent to 18,464 contracts in the week ended June 16, according to figures from the U.S. Commodity Futures Trading Commission.

    Copper for delivery in three months dropped $269, or 5.3 percent, to $4,761 a ton ($2.16 a pound) on the LME.

    Among other metals for three-month delivery in London, aluminum slid 6.3 percent to $1,574 a ton. Lead sank 5.5 percent to $1,602 a ton, and zinc dropped 4.7 percent to $1,502 a ton. Tin weakened 2.9 percent to $14,400 a ton, and nickel fell 4.6 percent to $14,500 a ton.

    (Source: Bloomberg)