US copper futures settled nearly 1 percent lower on Tuesday, weighed down by concerns over demand growth for the industrial metal at a time when the macro economy is showing continual signs of slowing, analysts said.
"I'm seeing a continued intensification in what seems to be a macro push toward some disinflation in commodities," said Gregory Weldon, independent analyst with Weldononline.com, adding that the recent inflation push has been led by the heavy losses in the energy sector.
"Copper has been right in line with the crude in that whole macro-reflation scenario, and now we're seeing the flip-side, so I think this is macro-economic pressure that is intensifying," he added.
Copper for March delivery ended down 2.55 cents, or 0.98 percent, at $2.5775 a lb on the New York Mercantile Exchange's Comex division, after dealing from an overnight low at $2.4850 to a peak at $2.6275.
Spot January fell 2.80 cents by the close at $2.5650, while the rest of the board ended with losses ranging from 0.65 cent to 1.85 cents. Final copper volumes were estimated at 7,000 lots, compared with the 8,821 lots recorded on Friday.
US crude oil futures fell more than $2 Tuesday, pushing below $51 for the first time since May 2005 after Saudi Arabia's oil minister said there was no need for an emergency Opec meeting to stop the continued price slide.
Declines in oil prices were seen benefiting the energy-intensive copper mining and smelting sectors, as production would be able to grow at lower costs, analysts said. Meanwhile, ongoing weakness in the US housing sector was also seen limiting copper's upside interest, as the general slowdown in home building directly correlated to the steady builds in copper warehouse stocks.
On Monday, Copper stocks in London Metal Exchange (LME) warehouses stood at 199,450 tones, more than twice their level at the start of 2006 and nearing 200,000 - where the market was no longer deemed tight.
LME stocks fell by 2,550 tonnes to 196,900 tonnes on Tuesday, while Comex stocks were up by 295 short tons to 36,403 short tons on Friday. LME three-months copper settled at $5,715 a tonne, up $85 from Monday's kerb close.
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