Copper rises on supply concern

Copper rose on Wednesday amid concern over physical supply as output in recent months was interrupted. However, gains were limited by Feds monetary stimulus outlook prior to key U.S. economic data, scheduled for today. Another bit of negative China data also weighed on prices.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery rose by 0.23% by 11:28 GMT, trading at $3.150 a pound. The industrial metal rose 0.8% earlier to hit a daily high at $3.169 a pound, strongest level since June 19. days low stood at $3.131 during the early Asian session. Copper has gained more than 2.5% so far this week after settling 1.29% lower last week and 3.14% the preceding one.

Freeport-McMoRan Copper & Gold Inc. is awaiting approval to reopen its Grasberg mine in Indonesia after it was shut following two separate deadly accidents in May and June. In April a landslide reduced production at Rio Tinto Groups Bingham Canyon mine in Utah, while Factory Orders in the U.S. rose more than anticipated during May. The indicator showed yesterday a 2.1% increase, compared to Aprils revised reading of 1.3% and forecasts of a 2.0% gain.

Jesper Dannesboe, a senior commodity strategist at Societe Generale in London said for Bloomberg: “There is an impression that the market is a bit short copper, so you have a little bit of a squeeze.”

Meanwhile, copper prices were pressured as key U.S. economic data scheduled for today is poised to show improved readings. If that is the case, Feds intentions to decelerate its monetary easing program will be further supported as consistent economic recovery and a stable labor market are the main requirements for the stimulus to be scaled back. The ISM Non – Manufacturing Composite index is due on Wednesday, coupled with the Trade Account, which is expected to show a 40 billion deficit. Also on Wednesday, the ADP Employment Change and Initial Jobless Claims will give a preliminary insight into the U.S. labor market’s state, prior to Friday’s most important Change in Non-Farm Payrolls and Unemployment Rate indicators.

China economic slowdown

Apart from shifting expectations of an earlier-than-expected deceleration of Feds Quantitative Easing, copper pricing is largely influenced by demand prospects from its biggest consumer – China. The Asian nation accounts for 40% of coppers global consumption. Another Chinese PMI report today showed a poorer performance by the countrys economy in June, compared to May. Chinas non-manufacturing PMI dropped to 53.9, down from 54.3 in May.

On Monday, the National Bureau of Statistics and China Federation of Logistics and Purchasing reported China’s PMI fell to 50.1 last month, below May’s 50.8 figure, but above expectations of 50.0, which is the neutral level of the scale. Values above 50 indicate economic expansion and below 50 – contraction.

According to a separate private index prepared by HSBC and Markit Economics, operating conditions in China’s manufacturing sector worsened during June for a second month in a row. The Asian country’s HSBC PMI stood at 48.2 in June, down from May’s 49.2 reading and below projections of 48.3, straying further from the neutral level. Chinese manufacturers signaled a first reduction of output since eight months in June. Total new orders fell for a second month as client demand contracted. Staff numbers were also decreased, marking the fastest job shedding since last August.

This comes after the China Securities Journal reported yesterday that the Asian country’s economic growth might slow down to around 7.5%, which is generally in track with other analysts’ expectations. Last week, Goldman Sachs trimmed its GDP growth projection for China to 7.4%, down from 7.8%, while the 2014 forecast was cut to 7.7% from 8.4%.