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Copper price falls to new low

By Wang Zhenghua (China Daily)
Updated: 2006-06-13 17:05

Late last week, copper fell 8.3 per cent in London and 4 per cent in Shanghai as central banks from Asia to Europe raised interest rates to curb inflation, stoking concern that demand for the metal may falter as economic growth slows.

But Wu Bowen, an analyst with Shanghai-based Jin Peng Futures Co, expected a conspicuous rebound as early as tomorrow or Thursday, after the US released its Consumer Price Index.

He attributed the slump in the copper price to the biggest weekly drop of US stocks in more than a year amid concern higher interest rates will curb economic expansion.

He also said that falling demand for copper in the power sector might drag down the metal's prices in the next two or three years.

"We have recently noticed that some electric wire manufacturers, which traditionally used copper as a key material, have a sluggish demand for the metal and their products haven't been selling well," said Wu.

Last week, the National Development and Reform Commission (NDRC), China's main economic planning body, said the country would reach a balance between energy supply and demand in the second half of the year.

The installed capacity of new power stations that came online in the first four months of this year alone amounts to 22.39 gigawatts, with total national capacity reaching 531 gigawatts, according to Zhang Guobao, vice-miniter of the NDRC.

With other power stations in construction, Zhang said capacity will rise by a total of more than 70 gigawatts by the end of the year.

"If the country can really enhance its power supply, it might be reluctant to approve the setting up of new power plants, and demand for copper will fall," Wu said.
"That would be bad news for copper speculators," he added.