Copper drops on ample supply forecast, China economic slowdown

Copper continued to fall on Thursday as concern over demand from the metals top consumer China continued to weigh on prices. Meanwhile, Goldman Sachs reported copper surplus may as much as double by 2015.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at $3.169 a pound at 9:05 GMT, down 0.31% on the day. Prices ranged between days high and low of $3.195 and $3.169 a pound respectively. The metal slipped 0.5% on Wednesday and trimmed this weeks advance to 0.7% after declining 0.24% the preceding one.

Copper remained pressured on Thursday as sentiment for curbed demand from top consumer China continued to weigh on prices. China’s manufacturing sector decelerated to an 11-month low in July according to the flash HSBC/Markit PMI. The index fell to 47.7, compared to June’s final reading of 48.2 and if confirmed in the final report on August 1, it will be the lowest in 11 months. Readings below 50 indicate contraction in the respective sector.

Meanwhile, a sub-index that measures employment fell for a fourth consecutive month below 50 to 47.3 in July, below June’s 47.7 reading and the the weakest since March 2009.

Key data indicating expansion or contraction of the Asian countrys economy has a strong influence on copper pricing as Chinas vast manufacturing sector accounts for 40% of global consumption.

Meanwhile, the industrial metal was also pushed down as Goldman Sachs said in a report today that global copper surplus may as much as double by 2015 and total 500 000 tons, up from 257 000 tons in 2013.

Zhang Tianfeng, an analyst at Dongxing Futures Co. in Shanghai, said for Bloomberg: “Copper may continue to be trapped in a narrow range, while any further dip may attract buying. There’s no support from actual demand.”

However, losses were limited as positive manufacturing data from the Euro zone on Wednesday brightened demand prospects. France’s Advance Manufacturing PMI for July rose to 49.8, up from June’s final reading of 48.4 and exceeding expectations for an increase to 48.8. Meanwhile, Germany’s Advance Manufacturing PMI surged above the neutral level to 50.3, compared to projections for a rise to 49.2 from June’s final figure of 48.6. The Euro zone’s Advance Manufacturing PMI also surprised with an unexpected gain to 50.1, well above the preceding month’s 48.8 and anticipations for a jump to 49.1.

On Thursday, the single currency blocs leading nation Germany posted once again positive economic data. The countrys IFO Business Climate in July surged to 106.2 and surpassed analysts expectations for a rise to 106.1 from Junes reading of 105.9, which fueled optimism. Germanys IFO Expectations for July fell to 102.4, a bit below analysts forecast to remain unchanged at 102.5, which was also the preceding months figure. However, the nations IFO Current Assessment also surpassed projections for a rise to 109.7 from Junes 109.4 and surged to 110.1.

Meanwhile, market players are keeping eyes on upcoming key U.S. economic data in order to further gauge the recovery pace of the world’s biggest economy. On Thursday, Durable Goods Orders for June should show a decrease to 1.1% from a revised 3.7% in May. Initial Jobless Claims should have surged to 340 000 in the week ending July 19, up from the preceding period’s 334 000. On Friday, the Final University of Michigan Confidence is expected to show a minor improvement and climb to 84.0 from Junes 83.9 reading.