Minews - Copper Extends Slump on New Sign of China Economic Slowdown

(Minews) - Copper prices eased Friday, dragged down by a rising dollar and a further decline in oil prices.

Copper for March delivery, the most actively traded contract, closed down 0.3% to $2.8175 a pound on the Comex division of the New York Mercantile Exchange.

The WSJ Dollar Index, which gauges the dollar against several major currencies, was recently up 0.7% to 83.59, its highest level since June 2003, as investors seek U.S. assets ahead of the Federal Reserve’s expected interest-rate increase this year. Meanwhile, the ICE dollar index surged to its highest level since March 2006.

The climbing dollar is bad news for copper, which is priced in the U.S. currency and becomes more expensive for foreign buyers as the dollar appreciates.

A drop in oil prices added to copper’s woes as some investors sold their commodity holdings to cover losses from oil, said George Gero, a senior vice president at RBC Capital Markets Global Futures.

“When investors get margin calls because of falling oil [prices], they sell copper or whatever else they have to sell,” Mr. Gero said.

Crude closed down 1.1% at $52.69 a barrel, the lowest point in more than five years.

Mounting concerns about the Chinese economy, which consumes more than 40% of the world’s copper, also weighed on prices.

The Chinese government’s official manufacturing purchasing managers index, a gauge of conditions in the manufacturing sector, slipped to 50.1 in December from 50.3 a month earlier, the National Bureau of Statistics said Thursday—the lowest reading in a year and a half.

Copper is widely used in manufactured goods and construction, and market participants fear the slowdown could result in lower demand.

Copper also declined on the London Metal Exchange on Friday, falling 0.7% to $6,252 a metric ton.

In 2014, the red metal registered its biggest annual price drop in three years on the London exchange, sliding by 14% amid ample supply and fears of a world-wide slowdown in demand.

On the LME, nickel for three-month delivery fell 2.1% to close at $14,830 a metric ton as stockpiles of the metal advanced to another record Friday.