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Commodity prices slump on recession fears

By Wang Lan (China Daily)
Updated: 2008-10-17 13:29

Growing concern about a worldwide economic downturn yesterday sent global commodity prices on a downward spiral.

All futures contracts on the Shanghai Futures Exchange fell sharply, with copper and zinc dropping to the daily limits and other futures contracts touching the lowest point in three years.

The most actively traded copper futures contract for December delivery dropped more than 4 percent to 40,070 yuan per ton at the opening of the morning session. The contract has fallen by an aggregate of more than 24 percent over the past two weeks.

The most actively traded zinc contract for same month delivery dropped to 11,025 yuan per ton, a record low since it started trading in May 2007.

Traders and analysts said newly released US economic data presented a gloomier outlook for the global economy, which is widely expected to slide into a prolonged slump.

US Bureau of Labor statistics showed that the producer price index (PPI) for finished goods fell 0.4 percent in September, seasonally adjusted. This decline followed a 0.9 percent drop in August and a 1.2 percent increase in July.

In addition, US retail sales in September dropped 1.2 percent from August, the biggest monthly drop in three years, as consumers were tightening their purse strings ahead of the Christmas selling season, according to latest figures from US Commerce Department. The decline was greater than the earlier estimate of 0.7 percent, suggesting that the US recession could be deeper than previously thought.

Uncertainties arising from doubts about the impact of the multi-billion dollar rescue operations had dampened investor sentiment and triggered large sell-offs in international commodities markets, analysts said.

On New York Mercantile Exchange, the price of crude oil futures has dropped an aggregate 31.9 percent to $72.9 over the past two weeks.

The continuous drop in commodities prices has failed to boost world demand, increasing investor worries of further shrinking global demand for raw materials as a result of the world economic slowdown.

Statistics released by Chile's central bank on Wednesday showed the country's copper exports in September dropped 20 percent from the same period last year to $2.3 billion.

On the London Metal Exchange, copper futures contracts for three-month delivery dropped a total of 46 percent to $4661.6 per ton from the peak in July.