US copper futures added to the previous session's losses at the open on Wednesday as investors eyed the fallout from problems in US credit markets and their potential effect on demand for the industrial metal, analysts said.
"Growth assets such as industrial metals will remain under pressure on fears that metals demand will be impacted by a slowdown in the global economy as the credit crunch intensifies," John Reade, head of metals strategy for investment bank UBS, said in a note to clients.
"Although global growth is strong now, there are clearly worries that the impact of this credit crunch will lower demand for industrial metals," he added. Copper for September delivery was down 2.25 cents to $3.3475 a lb by 10:31 am EDT (1431 GMT) on the New York Mercantile Exchange's COMEX division, slightly rebounding from an earlier low of $3.2920.
Traders attributed the turnaround to a rebound in US stock indexes and US economic data that failed to show any negative surprises. US industrial output rose by an expected 0.3 percent in July as automotive-related production surged 2.6 percent during the month, offsetting a decline in utility output, a Federal Reserve report on Wednesday showed.
The gain in July industrial output pushed the overall capacity use rate to 81.9 percent, the highest since September 2006, from 81.8 percent in June. Analysts had been expecting an 81.8 percent reading for July.
"We are seeing evidence of a broad manufacturing rebound," said Pierre Ellis, senior economist with Decision Economics in New York. "That compounds the impact of strong exports, suggesting that the domestic economy has a lot of resilience, which should make the Fed more comfortable about hanging tough in this environment."
In a separate report, the Labour Department reported a slightly smaller-than-expected 0.1 percent rise in US July consumer prices. Excluding volatile food and energy prices, the so-called core CPI advanced by 0.2 percent in July, directly in line with expectations.
Fundamentally, workers at the Ilo smelter in Peru of Southern Copper, one of the world's top copper producers, rejected on Tuesday the company's wage proposal and moved a step closer to walking off the job. Grupo Mexico, the parent of Southern Copper, also had its hands full with labour problems in Mexico. A strike at the Cananea mine has crippled production since July 30. A court hearing was set for Wednesday to decide on the legality of the strike.
China, the world's top consumer of copper, imported 116,913 tonnes of unwrought copper and alloy in July and 1,114,675 tonnes in the first seven months of the year, up 110.6 percent from a year earlier, Customs figures showed on Wednesday.
Comments
Comments are closed.