Copper Drops On High Inventories And Risks To European Recovery
Positive US and Chinese manufacturing data pushed copper to a short-lived, four-month high on Monday. Thereafter, copper prices slumped three days in a row as Spain became embroiled in a corruption scandal and the European Central Bank warned of risks to Europe's economic recovery.
After reaching a four-month high on Monday, copper fell the rest of the week on concerns about unusually high inventories. European Central Bank President Mario Draghi's comment that downside risks regarding the Eurozone's economic outlook remain — although recovery is expected later in 2013 — also put a damper on copper prices. Draghi's remark came after a corruption scandal in Spain put pressure on Prime Minister Mariano Rajoy to resign, and amidst increasing worries about the popularity of former Italian Prime Minister Silvio Berlusconi ahead of elections this month, Reuters reported. Draghi said the risks to Europe's recovery include the possibility of weaker-than-expected demand and exports, slow implementation of structural reforms in the euro area and geopolitical issues and imbalances in major industrialized countries. The ECB opted to keep interest rates unchanged at the record-low rate set in July last year. Meanwhile, COMEX copper inventories in New York rose to the highest level seen since May, while stockpiles monitored by the London Metal Exchange (LME) were at the highest level since December 2011, Bloomberg reported. “There is no indication of bullishness from the demand side,” Fang Junfeng, an analyst at Shanghai Cifco Futures, told Bloomberg. “The problems facing the European region have led some traders to see the outlook for the global economy as negative.” Trading in copper and other base metals was also thin this week ahead of Chinese New Year celebrations, which start on Saturday. On the LME, copper for three-month delivery closed down 0.55 percent, to $8,200 per ton, from the $8,245 closing price on Wednesday. COMEX copper for March delivery was down 0.4 percent, at $3.7255 per pound, in mid-afternoon trade in New York.