Copper Prepares for Plunge

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Already dipping a toe in declining waters, copper is expected to take a greater plunge this winter. The blame points at the worsening global credit crisis and weakened demand across consumer industries. Supply and demand plays a leading role in copper’s volatile prices, and demand is shrinking. Given the recent credit issues, many copper-reliant projects have been postponed,  lacking the funds to continue anytime in the immediate future.

Business Standard expects copper to fall another 20 percent before the end of the year. Even China, the world’s largest industrial metals consumer, has lost interest in re-stocking the red metal. Due to these drops in demand, “we anticipated that the red metal has further room to decline below $4,000 a ton towards the end of this year,” Jayant Manglik of Religare Enterprises told a reporter.

According to the Business Standard, copper’s current numbers read as follows: “[Copper] closed at $4,615 a ton on Friday, losing half of its value of $8,800 a ton, a record that it touched on the London Metal Exchange (LME) on May 5. Copper futures for delivery in December fell 26.15 cents to $2.1445 a pound on the Comex division of the New York Mercantile Exchange, after earlier touching $2.05, the lowest since January 6, 2006. Last week, the metal had dropped by 13 percent, the second-biggest decline on record.”

Producers fear that copper, like other base metals, could soon hit the marginal cost of production. In addition to copper’s drastic drop, nickel recently suffered a 5 percent drop; zinc, a 4.5 percent fall; lead, a 4 percent drop, and aluminum fell 2 percent. Smelters and miners have contemplated leaving the market, as there’s likely more downside remaining, and copper doesn’t have to drop much more before it reaches that marginal cost of production.

–Amy Edwards

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