Copper futures slumped yesterday, dragged down by falling gold and oil prices on international markets.
However, commodity analysts said they expect the price drop to be short-term, given the strong demand for the metal by rapidly developing economies including China.
Looking further ahead, analysts predict a considerable adjustment in copper prices will take place as early as next year as supplies from new mines in China will be closer to the buyers and could even lead to a slight surplus.
Copper for delivery in October fell to its daily allowed limit of 69,110 yuan (US$8,640) a ton on opening at the Shanghai Futures Exchange yesterday, slipping 2,880 yuan (US$360) or 4 percent from Monday's settlement price.
Following the maximum move allowed and the sharpest fall in more than a month, the metal price stayed at that level throughout the trading session.
Other commodities, including oil, aluminium, platinum, zinc, nickel rubber and gold, took similar falls.
"The recent slump is mainly caused by the falling price of oil and gold on international markets," said Wu Bowen, an analyst with Shanghai-based Jin Peng Futures Co.
On Monday the oil price fell slightly from US$78.7 a barrel to US$76.9 on the global market. Gold suffered a similar slump.
The overall dip in metal commodities has dragged down the price of copper, a key component in products such as electrical wire, said Wu.
But he was quick to add that a price fluctuation, which has taken place since copper skyrocketed to 85,550 yuan (US$10,700) per ton in mid-May, would continue over the next two months, even though a substantial slump that would drag the price below 50,000 yuan (US$6,250) was impossible.
"China's economy will continue its unexpected growth in the third quarter of this year," said Wu. And copper, a vital resource in construction, IT and other industries, will be in short supply.
Copper, which attracted speculators with forecasts that demand would exceed production, soared to a record high early this year.
Its sharpest fall in the last two months came in early June, when a ton of the metal cost about 55,000 yuan (US$6,880), still a much higher price than before the summer of 2005.
"Copper will remain between 50,000 yuan and 80,000 yuan (US$6,250 to 10,000) per ton for the rest of 2006," said Li Xun, an analyst with Shanghai-headquartered Dalu Futures Co.
"A considerable price adjustment might come only next year, as new mines, such as the one discovered in Southwest China's Tibet Autonomous Region, will be put in use."
By then, a small surplus of the metal will be possible, he added.
In another development, China Minmetals Corp has confirmed it suffered a loss of 500 million yuan (US$62.5 million) on copper futures on the London Metal Exchange since the second half of 2005, the Shanghai Securities News reported, citing an unidentified company official.
The newspaper cited the source as saying that the loss, within the transaction of its spot trading, was a result of normal hedging.
The company is one of 31 state-owned firms allowed to trade in overseas futures markets by the China Securities Regulatory Commission. It posted a net profit of 800 million yuan (US$100 million) last year.
(China Daily July 19, 2006)