Copper Falls as U.S. Government Shutdown Fuels Demand Concerns

Copper fell for the third time in four sessions after talks between President Barack Obama and congressional leaders failed to break a budget logjam that spurred a U.S. government shutdown in its third day.

The impasse raises the prospect of a prolonged standoff over the budget and talks to raise the U.S. debt limit. Failure to increase the government’s $16.7 trillion debt limit by Oct. 17 could trigger a default, President Barack Obama’s administration has said. The U.S. is the world’s biggest metals consumer after China.

There is “continued despondency over failure to resolve the government closure fracas, which threatens to stunt economic growth and hence demand for raw materials.” Michael Turek, a senior director at Newedge Group SA in New York, said by e-mail.

Copper futures for delivery in December slumped 0.9 percent to $3.2855 a pound at 10:18 a.m. on the Comex in New York. Volume was 47 percent lower than the average for the time of day over the past 100 days, data compiled by Bloomberg show.

The shutdown may cost the U.S. at least $300 million a day in lost economic output, researcher IHS Inc. estimates.

The metal “is going to sit in a tight trading range until the political standoff in Washington gets taken care of one way or another,” Mark Lewon, president of Salt Lake City-based Utah Metal Works Inc., said by e-mail. “The potential remains for copper to drop if the uncertainty does not get lifted.”

On the London Metal Exchange, copper for delivery in three months fell 0.7 percent to $7,228.75 a metric ton ($3.28 a pound).

Glencore Xstrata Plc said it suspended operations at its Falcondo nickel mine in the Dominican Republic because of a price slump. Nickel for delivery in three months added as much as 1.2 percent in London, before falling. Prices are down 20 percent this year, the most among the six main metals traded on the LME.

Aluminum, lead, tin and zinc were also lower in London.

Markets in China are shut through Oct. 7 for national holidays.

To contact the reporters on this story: Joe Richter in New York at jrichter1@bloomberg.net; Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net