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Copper’s rising prices during the last weeks of May optimism in the market. However, overwhelming amounts of data suggesting a decrease in demand appear to be tugging at investors’ confidence.
By Michelle Smith – Exclusive to Copper Investing News
Copper may have appeared to be on the rebound at the end of May, but numbers suggesting a decrease in demand are steadily popping up and investors are responding to them. As a result, copper prices are sliding.
Although prices had been down for two months, copper markets were showing some resistance to weak economic signs in the US and to China’s plans to take action to curb inflation. For the two weeks ending May, the red metal’s prices were gaining and they remained up on Tuesday. But, by Wednesday, a slew of unimpressive data had taken its toll and copper prices began falling.
The most actively traded copper contract for July delivery on the Comex in New York fell 7.1 cents to $4.1065 a pound on Wednesday. Wednesday morning, the prices slid further to $4.0755 a pound. Prices for three month delivery on the London Metal Exchange are also down for the second day, sliding $108 to $8,994 per ton, or $4.08 a pound.
Chile is global leader in copper production. In a recent Bloomberg interview, the nation’s President, Sebastian Pinera, said that while economic growth in China may slow to 7 percent from 9 percent that would still be enough to keep commodity prices high for a very long period of time.
The way that the copper markets are reacting to recent data suggests that everyone may not be so confident at this point.
Since copper is an industrial metal, it is little wonder that investors are taking notice of the stark statistics that analysts are putting out. Reports show China’s manufacturing grew at the slowest pace in nine months in May. And although China is the major player in copper market, and is considered a “swing factor,” other nations’ manufacturing data when compiled is too much to be ignored.
Output in the US is reportedly at its lowest levels in over a year. German manufacturing was reported as being below forecasts. And a drop in industrial production has been noted in India and the UK.
Manufacturing is only a portion of the disappointing numbers from the US. A slump in car sales added to worries about copper demand, since automakers are major consumers of the metal. Two of the big three American automakers, General Motors and Ford, reported sales declines, though neither of them was as great as the 9.1 percent drop reported by Nissan.
ADP, a payroll company, reported that private employers added far fewer jobs to the economy in May than previously expected. This negative report is likely to be confirmed by the official employment report from the Department of Labor that is scheduled for release tomorrow.
Aggravating matters even further are reports of shrinking consumer confidence and a double dip in housing prices, which is not expected to improve any time soon.
Analysts are predicting that copper may have a rough road ahead. Nic Brown, of Natixis Commodity Markets Ltd. in London, said he wouldn’t be surprised if copper took a bit of breather.
That may be one of putting it, but Rich Ilczyszyn, a senior strategist at Lind- Waldock clarified it with a numerical expression, predicting that copper may fall to $3.85 by the end of this month.
