Deepening Metals Rout Sends Copper Below $4,500 as Nickel Slumps

Deep Dive: Commodity Rout Gets Worse
  • Copper extends slide to lowest since 2009 amid China slowdown
  • Mining shares extend retreat to near almost seven-year low

Copper fell below $4,500 a metric ton for the first time in six years and nickel touched the lowest in more than a decade on concern producers aren’t doing enough to trim a glut of metal.

The retreat in commodities helped send a gauge of mining companies to near the lowest in almost seven years. The London Metal Exchange’s index of six main contracts has slumped 28 percent this year, the most since the global financial crisis in 2008, as a slowdown in top user China cut demand.

Expectations that the Federal Reserve will soon raise U.S. interest rates have boosted the dollar and made metals more expensive for buyers holding other currencies. At the same time, that’s lowering production costs of companies outside the U.S. and encouraging them to maintain output, according to T-Commodity, a Milan-based consultancy.

“Chinese demand is still weak,” Gianclaudio Torlizzi, a partner at T-Commodity, said by phone. “The bearish action is to force the local producers to cut production. What’s making people negative is the fact that the production costs of many metals has been holding pretty well.”

Copper for delivery in three months fell 2 percent to settle at $4,490 a ton at 5:50 p.m. on the LME, after touching $4,443.50, the lowest since May 2009. Copper futures also dropped on the Comex in New York.

Nickel slid as much as 6.4 percent to $8,175 a ton on the LME, the lowest since 2003. Zinc lost as much as 4.3 percent, reversing its advance on Friday after Chinese smelters announced they planned to cut production next year. The metal has extended its retreat this year even after Glencore Plc cut production by a third and Nyrstar NV said it may curtail as much as 400,000 tons if prices stay low.

Goldman Sachs Group Inc. this month said recent output cuts aren’t large enough to rescue prices, and that will require a substantial increase in Chinese demand. Bank of America Corp. estimates about 500,000 tons of copper production cuts are needed to bring an end to the supply surplus.

The Bloomberg World Mining Index fell as much as 1.6 percent, trading near a seven-year low reached in September. Freeport-McMoRan Inc., the world’s biggest publicly traded copper producer, declined as much as 3.8 percent.

Money managers were the most bearish on copper since August in the week to Nov. 17, according to the U.S. Commodity Futures Trading Commission data. In a Bloomberg copper survey last week, traders and analysts were bearish for a third week.

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