Copper futures tumbled the most in three weeks after China ordered companies in 19 industries to cut manufacturing capacity, signaling lower demand for industrial metals.
Surplus capacity must be idled by September and eliminated by year-end, the Chinese government said yesterday. A report on July 24 showed July manufacturing weakened more than estimated in the Asian nation, the world’s top consumer of copper. A basket of prices on the London Metal Exchange also dropped the most in three weeks.
“Everything we hear out of China now is about a slowdown and how they’re not buying copper, and this announcement just adds to those concerns,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “China is a big buyer of copper, so this is a problem.”
Copper futures for delivery in September slid 2.5 percent to $3.1055 a pound at 1:17 p.m. on the Comex in New York, the biggest decline for a most-active contract since July 5. The price has dropped 15 percent this year.
China plans to shut 654,400 metric tons of copper capacity and 260,000 tons for aluminum as part of the initial goal, Bloomberg calculations based on the government’s statement show.
The country produced 5.82 million tons of refined copper and 20.8 million tons of aluminum last year, according to Barclays Plc. Supplies will exceed demand for both metals, Barclays said.
On the London Metal Exchange, copper for delivery in three months fell 2.2 percent to $6,862 a ton ($3.11 a pound). Aluminum declined 1.6 percent to $1,794.50, the lowest settlement since July 9. Zinc, nickel and lead dropped, while tin rose.
An LME gauge of the six metals slumped 1.8 percent to 2,976.4. The index has dropped 14 percent this year.
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