Related topics

Supply Glut Forces Copper Price Down

May 27, 1999

Copper futures prices plunged 5 percent Thursday on the New York Mercantile Exchange amid disappointment that producers have not acted aggressively to reduce a glut.

On other markets, coffee and pork futures also fell sharply.

Copper futures fell as large trading firms bailed out of the market in droves amid frustrations that producers have been reluctant to deal effectively with near-record high inventories that have sent prices to their lowest in nearly 12 years.

Broken Hill Proprietary Co. has delayed until at least the end of June a decision on whether to shutter three U.S. mines that produce about 200,000 metric tons of copper a year. And Highland Valley Copper said it may reopen a mine it closed in mid-May if it can reach a collective bargaining agreement with its union.

Investors had been buying aggressively in recent weeks as they bet hot U.S. housing demand and a recovery in Asia’s economy would work with mine production cutbacks to boost prices. But despite perceptions of oversupply, production in the first two months of the year jumped 11 percent over the year-earlier period.

Copper is used in the housing sector for wiring, plumbing and household appliances.

Analyst Martin Squires at Rudolf Wolff also noted the peak demand period for copper is coming to an end. Consumption is weaker during the slow summer months as factories in Europe and the United States cut back production. Inventories typically rise sharply during this period.

Copper for July delivery fell 3.30 cents to 63.15 cents a pound, the biggest one-day decline since May 18, 1998.

Coffee futures fell sharply on the Board of Trade of the City of New York as meteorologists predicted Brazilian coffee-growing regions will remain frost-free over the U.S. Memorial Day weekend.

Brazil, the world’s largest coffee producer, has seen cooler than normal temperatures ahead of its winter but has so far escaped sustained freezing weather that could affect young coffee trees.

Brazil produces mainly robusta beans, which are not certified for delivery against New York futures contracts. But many roasters mix those beans with high-quality arabica beans for gourmet blends, and record production last year left the world flush with supplies.

July arabica coffee fell 1.85 cents to $1.23 a pound.

Lean hog futures fell sharply on the Chicago Mercantile Exchange amid expectations meat packer supplies will be ample going into the busy summer period, reducing the need to slaughter fresh supplies.

Prices faced continued pressure from the U.S. Agriculture Department’s monthly cold storage report, which showed frozen pork inventories have jumped to 593.510 million pounds, surpassing the previous record of 583 million pounds set in April 1952.

June lean hogs fell 1.83 cents to 52.17 cents a pound; July pork bellies fell 1.75 cents to 52.72 cents a pound.

Update hourly