Copper falls on slowing growth of Chinese provinces

Copper fell on Tuesday as China reported most of its provinces economic growth during the first half of the year underperformed expectations, spurring concern over faltering demand for the metal in the worlds top consumer.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at $3.087 a pound at 8:17 GMT, down 0.67% on the day. Prices ranged between days high of $3.111 and low at $3.078 a pound, the lowest since July 10. The industrial metal settled 0.23% higher on Tuesday but is marking a 0.7% weekly decline after falling 1.5% during the preceding two.

Copper continued to fall on Tuesday as China reported more than half of its provinces trailed growth targets for the first half of the year. According to data compiled by Bloomberg, seventeen out of 30 provinces economies grew less than expected up to June, compared to 14 out of 31 last year. This imposed a threat for meeting the years nationwide GDP growth target at 7.5%, which further pressured copper as the country accounted for more than 40% of global consumption in 2012.

Lian Zheng, an analyst at Xinhu Futures Co. in Shanghai, said for Bloomberg: “The biggest risk is still China’s macro data. Given the expectation of a surplus market, it’s hard to see any strong price rally.”

Copper was recently pressured as the country’s flash HSBC/Markit PMI 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.

The National Bureau of Statistics of China will release the country’s official Purchasing Managers’ Index (PMI) on Thursday. According to a Bloomberg survey, the reading may have dropped to 49.8, signaling contraction.

Last week, the Chinese Ministry of Industry and Information Technology ordered over 1 400 companies in 19 industries to cut surplus production capacity. Excess capacity must be idled by September and eliminated by the end of the year. According to Barclays Plc., the country produced 5.82 million tons of refined copper last year. This year, 654 000 tons of copper capacity must be shut down.

Meanwhile, Goldman Sachs said in a report on Friday that global copper surplus may as much as double by 2015 and total 500 000 tons, up from 257 000 tons in 2013.

Market players are looking ahead into this weeks key U.S. upcoming data and the outcome of FOMCs two-day meeting that ends on Wednesday. U.S. Q2 GDP growth is expected to have contracted to 1.0%, down from the first quarters 1.8% advance. Consumer Confidence and S&P/Case-Shiller Composite-20 Home Price Index will be released on Tuesday. On Wednesday, we’ll receive preliminary unemployment data prior to Friday’s Unemployment Rate. The ADP Employment Change is expected to remain flat at 188 000. Also on Wednesday, Personal Consumption Expenditures, Employment Cost Index and Chicago PMI will be released and the FOMC will announce its interest rate decision.

On Thursday, Initial Jobless Claims are expected to have risen by 1 000 in the week ending July 27 and the ISM Manufacturing index should show improvement. On Friday, one of Fed’s main requirements to trim its monetary stimulus, the Unemployment Rate, is expected to have fallen to 7.5% in July, down from 7.6%. Also on Friday are due Personal Income, Personal Spending, Average Hourly Earnings and Factory Orders.