Copper May Fall in New York as Growth Slows in China, World's Top Consumer
Copper may fall in New York on concern about weaker demand in China, the world’s biggest user, after economic growth slowed and industrial production rose less than estimated.
Gross domestic product expanded by 10.3 percent in the second quarter, down from the prior three months. Factory output gained 13.7 percent, less than all except one of 27 forecasts in a Bloomberg News survey. Copper also slid after the Federal Reserve yesterday cut its forecast for growth in the U.S., the second-largest consumer of the metal.
“The Chinese data shows a clear slowdown,” said Jesper Dannesboe, a strategist at Societe Generale SA in London. “But we would expect the Chinese government to prevent the slowdown” from continuing in the second half, he said.
Futures for September delivery rose 1.05 cents, or 0.3 percent, to $3.019 a pound at 8:05 a.m. on the Comex in New York, erasing a decline of as much as 0.7 percent. Copper for delivery in three months declined 0.7 percent to $6,680 a metric ton on the London Metal Exchange.
GDP in China swelled by 11.9 percent in the first quarter. Growth in the second quarter was less than the median estimate of 10.5 percent in a Bloomberg News survey of economists. JPMorgan Chase & Co. cut its full-year Chinese growth estimate to 10 percent from 10.8 percent.
Prices rebounded as the U.S. Dollar Index, a six-currency gauge of the dollar’s strength, fell for a third day, sliding as much as 0.7 percent. A weaker U.S. currency makes dollar-priced metals cheaper in terms of other monies. The index’s 6.6 percent gain this year has contributed to LME copper’s 9.5 percent drop.
“There has been a very close correlation very recently between markets,” Steve Hardcastle, an analyst at Sucden Financial Ltd. in London, said at a presentation yesterday. “It does affect physical trading, and it also affects the price movements.”
The Fed lowered its forecast for growth this year in the U.S. economy, the world’s biggest, to between 3 percent and 3.5 percent from the prior 3.2 percent to 3.7 percent.
A report from the Fed due at 9:15 a.m. Washington time today probably will show that industrial production in the U.S. fell in June for the first time in a year, economists said. A 0.1 percent decline, the median projection in a Bloomberg News survey of 76 economists, would follow a 1.3 percent jump in May that was the biggest in 10 months.
Copper also rebounded as inventories shrank further. Stockpiles monitored by the LME fell for a 20th day to 427,725 tons, the lowest level since Nov. 23. They are down 15 percent this year and headed for the first annual drop since 2004. Bookings to remove metal from LME warehouses rose 11 percent, the most in a month, to 31,575 tons.
“Tighter expected balances and declining inventories will likely put upward pressure on key commodity prices and returns,” Goldman Sachs Group Inc. analysts led by London-based Jeffrey Currie said today in a report. Still, “policy risks in Europe, China and the U.S. are likely to continue to generate volatility and increase the risk of economic disappointments over the short term,” they said.
Aluminum for three-month delivery on the LME rose 0.3 percent to $2,014 a ton. Immediate-delivery metal’s discount to the three-month price, the so-called contango, narrowed to $18.25 yesterday, the lowest closing level in almost a year and down from $19.75 in the prior session.
“Financing deals are tightening up the market,” William Adams, an analyst at Basemetals.com, said during the Sucden presentation yesterday. Estimates are that about 80 percent of aluminum stockpiles in LME warehouses are tied into financing agreements, according to Sucden.
LME-monitored inventories of the lightweight metal have dropped 5.3 percent this year to 4.38 million tons. Today they gained after five declines in a row.
Lead slipped 0.1 percent to $1,826 a ton and nickel fell 0.1 percent to $19,380 a ton. Zinc was unchanged at $1,850 a ton and tin rose 0.7 percent to $18,100 a ton.