Copper Prices Plummet Amid IMF GDP Growth Forecasts and Ebbing Demand

Copper futures hit a roadblock as the International Monetary Fund (IMF) adjusted downward its gross domestic product (GDP) growth forecasts for Japan and the US. The IMF's draft report, cited by ANSA, reduced its projected GDP increase for the US to 2.8% from 3.0% and for Japan to 1.4% from 1.6% in 2011. This news, coupled with a lackluster private-sector jobs report, weighed heavily on copper prices. Analysts, like Sterling Smith of Country Hedging, pointed out that cuts in GDP are detrimental to copper prices, as the metal is highly sensitive to economic data. Meanwhile, BHP Billiton Ltd. announced a $554 million project to expand the Escondida mine in Chile, the world's largest copper mine, which may provide some stability to copper prices.

Key Takeaways:

• Copper futures slumped 7.25 cents, or 1.7%, to settle at $4.2740 a pound on the Comex division of the New York Mercantile Exchange, amidst IMF's revised GDP growth forecasts.
• The IMF cut its projected GDP increase for the US to 2.8% from 3.0% and for Japan to 1.4% from 1.6% in 2011, as reported by ANSA.
• The projected cuts in GDP are considered detrimental to copper prices, according to Sterling Smith, analyst with Country Hedging.
• Private-sector jobs in the US rose by 201,000 this month, compared to an expected 205,000 gain, which may have contributed to the decline in copper prices.
• BHP Billiton Ltd. announced a $554 million project to expand the Escondida mine in Chile, which may help stabilize copper prices.

Sources:

• Dow Jones Commodities News via Comtex, Mar 30, 2011
• ANSA, as cited by Dow Jones Commodities News
• Matt Whittaker, Dow Jones Newswires, 212-416-2139; matt.whittaker@dowjones.com