SocGen and Citi: Cheaper Oil Means Cheaper Copper

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Lower fuel prices are compounding the longest commodity slump in a generation and copper is no exception.

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Because energy accounts for as much as half the cost to produce food and metals, all sorts of commodities will keep dropping, according to Societe Generale SA and Citigroup Inc. With inventories ample and slowing economies eroding demand, cheaper oil lowers the price floor for mining companies and farmers to remain profitable.

Goldman Sachs Group cut its outlook for copper prices on Nov. 17, citing a strengthening dollar and falling input costs, including oil. The bank lowered its six-month outlook by 6.1% to $6,200 a metric ton. Prices today traded at $6,380.50. Energy accounts for about 18% of production costs, analysts led by Max Layton said.

On Monday, December 8, the day’s biggest mover was the price of Chinese copper bar, which saw a 1.7% decline to CNY 46,970 ($7,638) per metric ton. The Chinese copper cash price inched up 0.6% to CNY 48,270 ($7,849) per metric ton. The price of Chinese copper wire steadied at CNY 46,980 ($7,640) per metric ton following two-days of increases. At CNY 40,500 ($6,586) per metric ton, the price of Chinese bright copper scrap was essentially unchanged.

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The Japanese copper cash price rose 1.5% to JPY 811,000 ($6,670) per metric ton. The price of US copper producer grade 122 weakened by 0.3%, settling at $3.63 per pound. The price of US copper producer grade 110 declined 0.3% to $3.63 per pound. The price of US copper producer grade 102 saw a 0.3% decline to $3.82 per pound.

At $6,535, the primary copper cash price finished the market day on the LME up 0.7% per metric ton. Also on the LME, the copper 3-month price increased 0.7% to $6,478 per metric ton.

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