Copper tumbled the most in almost six years as it followed other metals lower amid a collapse in commodities.
Lower energy costs and demand weakness amid worse-than-expected economic data in China are driving prices down, according to Goldman Sachs Group Inc. Consumption in the world’s biggest user will grow at the slowest pace since at least 2009, Deutsche Bank AG estimates. Prices slumped as much as 8.6 percent in London today and fell by the daily limit in Shanghai.
Commodities have sunk to the lowest level in more than 12 years, led by a rout in energy prices, after a decade-long bull market led producers to boost output and a stronger dollar diminished their allure to investors. Oil’s 60 percent decline since last year’s peak is cutting costs for mining companies and bolstering speculation the glut will worsen. Copper is the worst performing non-energy raw material this year on the Bloomberg Commodity Index (BCOM), which fell to the lowest since August 2002.
“People have seen oil prices decline so much and now they’re targeting other commodities,” Ivan Szpakowski, an analyst at Citigroup Inc. in Hong Kong, said in an interview with Bloomberg TV today. Copper is falling faster than most other commodities because “it’s the one that is played by the macro investors and by people who are looking at the broader picture rather than commodity fundamentals.”
Copper for delivery in three months on the London Metal Exchange dropped as much as $506.75 a metric ton to $5,353.25, the lowest since July 2009. The metal was trading 5.2 percent lower at $5,555.25 a ton by 12:49 p.m. in London.
Cutting Losses
Demand growth in China will slow to 4 percent in 2015 from 5.5 percent last year, according to estimates by CRU Group, a research company. Between 2002 and 2012 it averaged more than 10 percent. Economists surveyed by Bloomberg forecast the country’s economy to grow 7 percent in 2015, the slowest pace since 1990.
“People are concerned about the demand growth in China,” Chunlan Li, a Beijing-based copper analyst at CRU, said today by phone. “We have seen sharp declines in oil prices and the macro-economic picture doesn’t look good.”
The world economy will expand 3 percent in 2015, according to a World Bank report, down from a projection of 3.4 percent in June. The Washington-based lender cut its forecast for China, saying the world’s second-biggest economy is undergoing a “managed slowdown.”
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