After concern that a coordinated reduction in interest rates in the U.S. and Europe won't be enough to restore investor confidence and revive economic growth, copper fell to its lowest price since March 2006
After concern that a coordinated reduction in interest rates in the U.S. and Europe won't be enough to restore investor confidence and revive economic growth, copper fell to its lowest price since March 2006.
The U.S. Federal Reserve, European Central Bank and four other central banks lowered borrowing costs in an unprecedented effort to thaw credit amid the worst financial crisis since the Great Depression. The Reuters/Jefferies CRB Index of 19 raw materials dropped as much as 1.8 percent.
“The market is saying this action is not enough,” said Frank McGhee, the head metals dealer at Integrated Brokerage Services LLC in Chicago. “The best the central banks can do to turn the tide is turn confidence, and they haven't been able to do that. Copper will continue to get punished in view of the continued, deteriorating global economic outlook.'”
Copper futures for December delivery dropped 17.95 cents, or 7.1 percent, to $2.355 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $2.34, the lowest for a most-active contract since March 22, 2006.
The metal has tumbled 23 percent this year as tighter lending conditions stalled global growth and construction demand waned amid the U.S. housing slump.
The global economy is headed for a recession next year as growth in U.S. gross domestic product grinds lower, the International Monetary Fund said today. The world is ``entering a major downturn,'' the IMF said.
“The supply-demand equation still sets up very negatively for copper given the economic outlook,” said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. “Base metals are subject to economic fortunes, and there's nothing to be optimistic about now.”
Copper may touch $2.25 by the end of the year, O'Neill said.
Supplies of the metal will exceed demand by 277,000 metric tons next year, up from 109,000 tons this year, the International Copper Study Group said today. Mine production will gain almost 11 percent next year as usage lags, increasing by 3.4 percent, the group said.
On the London Metal Exchange, copper for delivery in three months lost $390, or 6.9 percent, to $5,240 a metric ton ($2.38 a pound).