A sharp fall in US copper imports reflects a deepening economic slowdown and points to further weakening in construction and manufacturing, and the price of copper, before the growth outlook gets better. Data from the United States International Trade Commission on Thursday showed September copper imports slowed to 54,515 tonnes from 86,878 tonnes in August, a decline of more than 37 percent.
"The auto industry is just another component of a failing economy," said Zachary Oxman, senior trader with Wisdom Financial in Newport Beach, California. "I expect to see demand decreasing, imports decreasing, and supply increasing, and price falling off." Imports for the first nine months of the year fell 13.6 percent to 561,189 tonnes from 649,743 tonnes in the same period in 2007.
The drop-off in domestic consumption of the red metal was consistent with the broader economic slowdown. Most economists, bankers and government officials see recession as a certainty. Billionaire hedge fund investor George Soros said another depression could not be ruled out.
Sterling Smith, vice president with FuturesOne in Chicago, saw import weakness into the first half of 2009. "We'll look and see where we are in the first quarter, but think you can count on it being even worse." Building construction accounts for more than 40 percent of all copper usage, while a typical US-built automobile is comprised of more than 50 lbs of the red metal.
That said, a correction in the US housing market since 2006 and now a slowdown in the automotive sector has compounded the metal's already weakened state of demand. "Your key copper-consuming sectors are building and construction and automotive, and we know what's happening in both of those areas," John Gross, publisher of the Copper Journal, said.
The US automotive industry is on the brink of financial collapse, with car sales plummeting at the big three auto makers - General Motors, Ford, and Chrysler. The deterioration in the industry has created a heated debate is Washington over whether or not to use $25 billion of a $700 billion financial rescue package to provide a lifeline to the ailing auto sector.
Prices of copper on the COMEX division of the New York Mercantile Exchange stand at $1.65 a lb, down nearly 60 percent since July when prices were above the $4 mark. Analysts have lowered forecasts for copper and other base metals in light of the global economic downturn.
Investment bank Goldman Sachs slashed its 2008 forecast for copper for three months delivery on the London Metal Exchange to $3,500 a tonne from an old forecast of $7,960, as the credit crisis exacerbated an already weak economic environment.