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Copper Drops on Growth Concerns in Japan

By Jim Williams
News out of Asia is impacting the price of copper, but this time it isn’t China – it is Japan making the dent in the price of the red metal.

Copper futures fell for the third time in four sessions as concerns over demand mounted after Japan unexpectedly sank into a recession and U.S. industrial production declined.

Gross domestic product in Japan, the fourth-biggest user of the metal, posted a second straight quarterly drop in the three months through September. Output at factories, mines and utilities in the U.S., the second-biggest consumer, fell 0.1 percent in October, according to a Federal Reserve report released Monday.

“Japan’s figures have proved disappointing across the board,” states Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “Unless the economy gathers pace again soon, this is also likely to have a negative impact on demand for metals.”

Japan’s Prime Minister Shinzo Abe is trying to do something about that pace. Reports out of Japan say the Prime Minister will delay an unpopular sales tax hike and call a snap election just two years after he took office.

Slowing global growth could drag on demand for copper, which is expected to stay muted in 2015 as the market is expected to swing into surplus for the first time in the last six years.

“Copper looks range-bound for the rest of the year, around the $6,600 mark,” says analyst Daniel Morgan from UBS in Sydney. “Supply continues to be a headwind into next year.”

Copper futures for delivery in March dropped 0.2 percent to settle at $3.0315 a pound on the Comex in New York. Overall, copper prices are down 11 percent this year.

On the London Metal Exchange, copper for delivery in three months fell less than 0.1 percent to $6,704 a metric ton ($3.04 a pound).

In Other News

  • No further updates on the Freeport-McMoRan Inc. copper smelter in Miami, Arizona. At last report, the plant – about 90 miles east of Phoenix – has been shut down since Wednesday of last week after an explosion and fire. No one was injured in the incident. A spokesperson for Freeport-McMoRan says any shortfall in production at the Arizona plant will most likely be made up at other McMorRan Inc. smelters.
  • China’s smelters have ramped up output to take advantage of higher processing fees as the past decade’s boom in investment translates into more mine supply. China’s refined copper output rose 13.6 percent in October from a year before to 732,746 tons, data from the statistics bureau showed on Saturday.
  • Market attention was turning to U.S. industrial output figures later, to see if the economy is keeping up brisk growth after U.S. retailers reported strong sales in October.
  • China’s bank lending tumbled in October and money supply growth cooled, raising fears of a sharper slowdown in the economy and prompting some economists to urge the government to ratchet up stimulus measures, including cutting interest rates.

Interesting Reads on Copper
Calling For A Copper Surplus? Not So Fast
The Hidden Hand in the Global Copper Market

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