Copper pulls down BSE metal index 4.68%

Weakening global commodity prices, slowing Chinese demand chief culprits.

Global copper prices crashed almost 10 per cent on Tuesday, pulling down the Bombay Stock Exchange (BSE) metal index by 4.68 per cent. This was despite the Sensex gaining 0.64 per cent to close at 5,713 today.

Hindalco was the biggest loser in the Sensex basket, with the scrip falling 6.87 per cent to close at Rs 1,237.10. The Tata Steel stock fell 3.38 per cent to Rs 284.40.

The Steel Authority of India lost 2.57 per cent to Rs 47.45, National Aluminium Company fell 5.87 per cent to Rs 169.95 and Sterlite Industries was down 5.63 per cent to Rs 581.85.

Metal stocks witnessed selling pressure amid worries over weakening global commodity prices and slowing Chinese demand. In the last two days, global non-ferrous metal prices have plunged amid fears of a demand slowdown from China and heavy selling by hedge funds.

The funds were aggressive buyers in the last few months. Industry observers and sector analysts said the month-long rally of global metal prices was largely speculative, led by hedge funds. "The way prices went up, the crash was expected," said a metals analyst.

International prices of aluminium and copper had increased 12.4 per cent and 17.8 per cent, respectively, in the last one month, on account of short supply and heavy buying by hedge funds.

While aluminium metal prices on the London Metal Exchange went up from $1,690 per tonne in mid-September to almost $1,900 per tonne, they have now fallen to $1,747. Copper prices have slipped to $3,042 per tonne, before touching a nine-year high of almost $3,300 in the beginning of this week.

An international metals analyst said, "The decline in metal prices in the last two days has been on the back of unwinding of positions by hedge funds, leading to huge selling pressure. The slowing of oil and copper consumption by China, a key factor, has also hit the market sentiment."

However, industry sources said the fundamentals of the sector were still strong, with a firm demand and supply scenario. "The mid-term and long-term outlook on the sector is still very positive, but there could be a further correction in prices in the near term," said a senior industry official.

"BHP Billiton, the world's largest mining company, has expressed concern over the excess supply of copper in the second half of 2004. This has impacted the futures price, which has also come down sharply," the official said, pointing out that the 15-month futures price of copper, at the LME, was $2,400 per tonne, while the 27-month futures price was $2,135.