Aluminum Falls Most in 17 Years, Copper Slides on
Jan. 4 (Bloomberg) -- Aluminum prices in
``There's got to be some sort of shift out of commodities this year,'' Maqsood Ahmed, an analyst at Calyon Financial in
Global demand growth for aluminum will slow to 5.3 percent in 2005 from 8.1 percent last year, Barclays Capital said Dec. 16. In
Aluminum for delivery in three months on the London Metal Exchange closed open outcry trading down $168, or 8.5 percent, to $1,800 a metric ton. It was the biggest decline since October 1987. The lightweight metal used in food packaging and construction gained 22 percent in 2004, the most in five years.
Copper fell $254, or 8.1 percent, to $2,895 a ton, its biggest one-day drop since Oct. 13. The metal, used in wiring and plumbing, advanced 37 percent on the exchange in 2004, the biggest riser among seven metals. It traded at a 16-year high of $3,179.5 on Oct. 11.
``There has been selling from funds'' that piled into the metals markets last year, Roy Carson, a trader at Triland Metals in London, said in a telephone interview.
Narrowing Deficit
The prices of oil, gold and base metals have fallen at the start of this year due partly to selling by hedge funds and other speculators who bought amid surging global demand for raw materials in 2004. Commodities priced in dollars also were purchased to protect against the decline of the dollar against other currencies, including the euro and yen.
Other metals on the LME also closed lower. Lead dropped 9.2 percent to $922 a ton, its biggest fall in 15 years. Nickel had its biggest slide in a month, down $1,025 to $14,000. Zinc was down $83, the most in 7-1/2 years, to $1,165. Tin fell $220 to $7,560.
Copper demand in 2005 will rise 4.6 percent to 17.5 million tons, exceeding production by 277,000 tons, Barclays Capital said in its report last month. The deficit in 2004 was 684,000 tons, the bank said. Producers such as Phoenix-based Phelps Dodge Corp. raised output in 2005, narrowing the shortfall.
``We think we have seen the top of the commodity cycle,'' Nick Moore, an analyst at ABN Amro in
Metal Company Shares
Phelps Dodge, the world's No. 2 copper producer, fell $3.65, or 3.7 percent, to $92.24 in
``Phelps Dodge has been a leader of the copper market,'' Michael Purdy, vice president at ABN Amro in
Other metal producers also fell. Shares in Melbourne-based BHP Billiton, the world's largest mining company, closed in
Dollar's Drop
The dollar rose 1.4 percent to $1.3298 versus the euro in
``Commodities for much of December were matching the dollar blow-for-blow,'' ABN's
LME-monitored copper inventory was unchanged at 48,875 tons, the exchange said in a daily report. The total shrank 89 percent in 2004 as consumers withdrew metal from storage.
Speculators increased their net-long position in
``There was very good fund buying last week,'' Robert Barham, a trader at IFX Markets in
Speculative long positions, or bets prices will rise, outnumbered short positions by 26,523 contracts on the Comex division of the New York Mercantile Exchange, the
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Prudent Investor Says: Endgame? I think not. I have noted presciently in my New Year's outlook that the US Dollar was poised for a massive rebound. Naturally, commodities such as industrial metals whom have risen due to the US dollar's fall, moved inversely to the currency's tracks. Given that the US dollar fell quite sharply late late year, this move was 'on the screen'. The US dollar's plight is hardly a done deal.
Moreover, it seems that US dollar's rebound has coincidentally been baneful to the US markets. Could this simply be the one of the symptoms from the US FEDERAL RESERVE's recent monetary tightening?
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