Copper Prices Plummet Amid US Credit Downgrade Concerns

Strategic Insights -

Copper futures fell sharply on August 8, 2011, after the Standard & Poor's credit downgrade of the US credit rating. The downgrade triggered economic concerns, leading to a decline in copper prices, which are considered a bellwether of economic growth. The most actively traded contract for September delivery was down 4.45 cents, or 1.3%, at $4.0625 a pound on the Comex division of the New York Mercantile Exchange. Thinly traded August-delivery copper was down 3.65 cents, or 0.9%, at $4.0765 a pound.

Key Takeaways:

  • Copper futures fell 4.45 cents, or 1.3%, to $4.0625 a pound on the Comex division of the New York Mercantile Exchange.
  • The decline in copper prices is attributed to fears of global slowdown and the US credit rating downgrade.
  • Copper prices are down 9.5% this month, with investors shedding risky assets and turning to perceived safe-haven assets like gold.
  • The production disruptions at the world's largest copper mine were a source of support for copper prices last week, but the 15-day worker strike at BHP Billiton Ltd.'s (BHP) Escondida mine in northern Chile ended on Friday.
  • The Standard & Poor's credit downgrade has added to economic concerns, citing "political brinkmanship" as part of the reason for its decision.
  • The US credit rating downgrade is expected to raise the cost of borrowing for the US Treasury and have wide reverberations throughout the economy.

Statistics:

  • Copper prices are down 9.5% this month.
  • The most actively traded contract for September delivery fell 4.45 cents, or 1.3%, to $4.0625 a pound.
  • Thinly traded August-delivery copper fell 3.65 cents, or 0.9%, to $4.0765 a pound.
  • The ICE Dollar Index was recently at 74.792, up from 74.549 late Friday in New York.
  • The world's largest copper mine, BHP Billiton Ltd.'s (BHP) Escondida mine in northern Chile, saw a 15-day worker strike end on Friday.

Sources:

  • Dow Jones Commodities News via Comtex, August 8, 2011
  • Dow Jones Newswires, August 8, 2011
  • Amy D'Onofrio, Dow Jones Newswires, August 8, 2011