October 8, 2008 / 8:53 AM / 11 years ago

UPDATE 10-Base metals sink as demand woes outweigh rate cuts

 * Copper crumbles to 20-month low
 * Global central banks rate cuts fail to inspire bulls
 * Fears of global recession grow  (Changes headline, recasts, adds byline and NEW YORK to dateline, updates with New York closing copper prices, adds analyst comments)
 By Chris Kelly and Anna Stablum
 NEW YORK/LONDON, Oct 8 (Reuters) - Industrial metals slumped on Wednesday as global economic concerns continued to bite and investors feared that coordinated rate cuts by global central banks would fail to thaw frozen credit markets and avoid a global recession.
 In an attempt to stem the worst global financial crisis since the 1930s, the U.S. Federal Reserve, European Central Bank, Bank of England, Switzerland, Canada and Sweden all lowered official rates by a half-percentage point. [ID:nL8116323]
 The People’s Bank of China, in what appeared to be the first time it had coordinated with the Group of Seven advanced industrial nations, also lowered its key rate, but by a more modest amount. [ID:nPEK61552]
 “The coordinated action is positive but it doesn’t really impact on the immediate demand outlook for base metals,” said Leon Westgate, analyst at Standard Bank. “After the initial euphoria there is still concern about the global economic outlook and demand for metals.”
 LME copper MCU3 — often seen as a key gauge of real economic activity — fell 7.1 percent to the lowest level since March 2006 at $5,227 a tonne in early trade. It closed down $385 at $5,240.
 In New York, copper for December delivery HGZ8 plunged 17.95 cents, or 7 percent, to settle at $2.3550 a lb on the New York Mercantile Exchange’s COMEX division, its lowest level on a closing basis since February 14, 2007.
 Bill O’Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey, believed confidence, or the lack thereof, was the real key plaguing global markets.
 “Until we get some change there, certainly the atmosphere for gold will continue to be very positive and for copper and the base metals will continue to be negative.” O’Neill said.
 The price of copper is down over 40 percent since touching a record of $8,940 per tonne in July and $4.27 a lb in May of this year.
 “We’re still looking at the prospects of global demand for copper to be weak. The supply/demand equation into at least the first half of 2009 sets up weakly for copper,” O’Neill added.
 Europe’s top copper miner KGHM KGHM.WA expects 2009 to be “much more difficult” than 2008, as lower copper demand may hit its revenues, its chief executive said. [ID:nL85993]
 The International Copper Study Group (ICSG) forecasts a copper surplus of 100,000 tonnes in 2008. [ID:nL884848]
 Anxiety about the health of the world economy grew overnight after remarks by Federal Reserve Chairman Ben Bernanke highlighting the fact that recent economic data and financial developments showed the outlook for growth had worsened.
 “The market is perceiving a global recession,” analyst Robin Bhar at Calyon said.
 Aluminium MAL3 fell to a near three-year low of $2,230 a tonne before recovering to $2,250, compared with $2,303 on Tuesday.
 Rio Tinto Ltd/Plc (RIO.L) (RIO.AX) said it restarted idled production at its Tiwai Point aluminium smelter in New Zealand. Output at the 350,000 tonnes a year plant was cut by 11 percent in May to conserve electricity [ID:nL8140994].
 Stocks of the metal in LME warehouses at more than 1.39 million are the highest since February 2004.
 Aluminium producer Alcoa Inc (AA.N) said longer-term prospects for pricing and global demand are good despite measures to rein in capital expenses and review underperforming assets to combat softer demand and tighter margins. [ID:nL8622472]
 Tin MSN3 fell 8.6 percent to $14,800 in early trade, down from $16,200 on Tuesday. It closed at $14,900.
 Lead MPB3 closed at $1,575 from $1,630 after touching a 3-month low of $1,566, while zinc MZN3 declined to a three-year low of $1,430 from $1,550.
 Nickel MNI3 fell 8.6 percent to a 35-month low of $12,975 a tonne. It closed at $13,200.
 The global nickel market will be in a 110,000-tonne surplus in 2009, the International Nickel Study Group (INSG) said. [ID:nL8683406]
 Metal Prices at 1909 GMT  Metal            Last      Change  Pct Move   End 2007   Ytd Pct
                                                         move  LME Cu        5305.00     -320.00     -5.69    6670.00    -20.46  SHFE Cu*     45720.00    -2920.00     -6.00   56880.00    -19.62  LME Alum      2280.00      -23.00     -1.00    2403.00     -5.12  SHFE Alu*    14230.00     -240.00     -1.66   18180.00    -21.73  COMEX Cu**     235.65      -17.80     -7.00     303.05    -22.24  LME Zinc      1460.00      -90.00     -5.81    2370.00    -38.40  SHFE Zinc*   12730.00     -115.00     -0.90   18950.00    -32.82  LME Nick     13100.00    -1100.00     -7.75   26350.00    -50.28  LME Lead      1585.00      -45.00     -2.76    2550.00    -37.84  LME Tin      14800.00    -1400.00     -8.64   16400.00     -9.76  ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07  (Additional reporting by Julie Crust in London and Nick Trevethan in Singapore; Editing by Christian Wiessner)   

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