Copper falls to seven-week low, outlook gloomy
Pratima Desai
Monday, November 05, 2007
LONDON — Copper prices tumbled to seven-week lows on Monday as the market fretted about rising stocks and supplies and falling demand, while zinc hovered near a 19-month low and aluminum hit a three-month high.
Gloomy prospects for base metal prices and financial market turmoil weighed on London-listed miners such as BHP Billiton, Rio Tinto and Xstrata were all down more about 2 per cent.
Copper for three month delivery on the London Metal Exchange was down at $7,410/7,430 (U.S.) a tonne by noon GMT compared with an earlier $7,350, the lowest since September 12.
The metal used extensively in the power and construction industries closed at $7,435 on Friday and is down more than 10 per cent since early October, when worries about economic and demand prospects escalated.
“People are waking up to the fact that the supply side is going to grow reasonably well, we've seen LME stocks going up,” said Daniel Smith, metals analyst at Standard Chartered.
“Copper and zinc are much more exposed to the construction market than some of the other metals markets.
Analysts say the slump in the U.S. housing market and weak construction activity meant falling demand from the one of the world's consumer of copper.
Stocks of copper in LME warehouses at around 168,000 tonnes — more than enough for three days global consumption — are at their highest since the middle of April. They have risen by nearly 30 per cent since late September.
Expectations of greater availability means the premium for cash material over the three-month contract at around $80 at the beginning of October has turned into a discount of $3.
Aluminum rose to $2,634 a tonne, the highest since August 9, a gain of more than 10 per cent since early October.
It was last at $2,603/2,606 from $2,622 on Friday.
Stocks of the metal used for in power, construction and packaging in LME warehouses stand at more than 914,000 tonnes — about 9 days global consumption.
But they have been falling and the market is also worried about exports from China, the world's biggest producer. That has prompted many speculators to cut back on short -- bets on lower prices -- positions.
“Lower Chinese primary exports are a likely rationale behind the depleted stocks as availability of metal in the region has been reduced,” Deutsche Bank said in a research note.
“We think a continuation of lower Chinese exports will provide a constructive backdrop for aluminum prices in 2008.”
Zinc, used for galvanizing stainless steel, was at $2,735/2,750 a tonne, down from $2,769 on Friday when it hit a 19-month low of $2,655 a tonne.
Stocks have risen nearly 40 per cent over the last couple of weeks and at more than 80,000 tonnes are at six-month highs.
Analysts expect supplies to rise over coming months and think prices will fall further before the market stabilises.
They cite as an example the San Cristobal project in Bolivia, controlled by U.S.-based Apex Silver Mines, which made its first shipment of zinc concentrate last month.
Meanwhile a strike in Peru has so far failed to boost the mood in metals markets, traders said.
Tin was at $16,650/16,700 a tonne from $16,500/16,600 on Friday, lead was at $3,725/3,740 from $3,713 and nickel was at $31,700/31,900 from $32,200.
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Stock futures tailspin on credit crisis
Monday, November 05, 2007
Investors around the globe are running for cover on Monday as new writedown disclosures by Citigroup Inc. on Sunday renewed fears that the end of the credit crisis is still a long way off.
U.S. stock-index futures are tumbling as European and Asian markets extended losses, driven by a sell-off in the financial sector. HSBC, Barclays, Royal Bank of Scotland and UBS all fell between 2.3 and 5.8 per cent by midday in the wake of Citi’s disclosure that it will take up to $11-billion (U.S.) in additional writedowns in the final quarter.
That’s on top of more than $6-billion of charges in the third quarter.
“This adds a new doubt,” Salah Seddik, a fund manager at Richelieu Finance in Paris, told Bloomberg News. “Losses could be more than expected and the return to normal is taking longer than we thought. Uncertainty is weighing on financial shares.”
At least two brokerages cut their price targets on Citigroup, the worst performing component of the Dow Jones industrial average so far this year, adding additional pressure to the stock in the pre-market.
Shares of Merrill Lynch and Bear Stearns also declined after Lehman Brothers downgraded its recommendations on both brokerages to “equal weight” from “overweight.” Lehman cut Merrill’s price target to $58 from $79 and Bear Stearns to $117 from $145.
Also retreating in Europe were J.P. Morgan, American Express, Bank of America and Wells Fargo.
With less than two hours before Wall Street opened, Dow Jones industrial futures dropped 117 points, S&P 500 futures were down 13.8 points and Nasdaq futures down 18 points.
Another casualty from the curb of available bank lending is Sainsbury PLC, Britain’s third-biggest supermarket chain, which lost nearly 20 per cent of its market value after a Qatari takeover bid evaporated, partly because of the ongoing global credit squeeze.
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