MercoPress. South Atlantic News Agency

Copper prices fall to 8 month low below 3 dollars benchmark

Copper prices fell on Wednesday to an eight-month low, below 3 US dollars per pound, on the London Metal Exchange after rising dramatically last week due to several earthquakes in northern Chile's mining region. However the monthly average for copper remains at 3.21 US dollars.

A deteriorating US housing market and mortgage crisis has snowballed into a global financial problem, weakening the outlook for copper, a key economic indicator and raw material in construction, power generation and telecommunications. Long investors who are typically bullish on prices are wondering if they should exit from the base metal, which has underperformed lately against top commodities like crude oil and gold. Analysts, however, think some patience may be worthwhile. Copper has been extremely volatile since reaching an all-time high above 4 US dollars a lb. in New York and nearly 8.800 US dollars a ton in London in May 2006. This year, prices spiked first in May, then in July, before a broad rally began in all commodities, and finally in October. Over the last two months, copper has been on a downward spiral, losing a fifth of its value amid growing uncertainties in the US economy, creeping stockpiles in global exchange warehouses and a thinner appetite for the metal from top importer China. Nevertheless prices of copper on both the New York Mercantile Exchange and London Metal Exchange are up 7% on the year, a factor that is keeping long investors hopeful that there will be another rally in coming months. "What we have been seeing is quite a big move away from risk" said Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto explaining the recent slump in copper prices even as other commodities rallied. "What copper says should be taken seriously," Melek added. "What we're seeing is the unfolding of credit problems, and at the same time, the US housing market is in quite a bit of trouble, so none of it looks particularly pretty." But some analysts said the picture for copper will not be bleak for long if China returns to buy in a big way. China's net imports of refined copper in the first eight months of 2007 rose 208% over the same period of last year, the International Copper Study Group said. Copper is a vital commodity for countries such as Chile with metal exports representing over half the country's overseas sales.