US copper futures lost nearly 3 percent of their value early on Tuesday, with worries about slowing economic growth and its impact on demand keeping the red metal skewed to the downside, traders said.
Copper for December delivery ended down 9.10 cents, or 2.68 percent, to $3.3060 a lb on the New York Mercantile Exchange's COMEX division, after dealing in a session range between $3.2675 and $3.3880. By 12 pm EDT (1600 GMT), futures volumes were estimated at 8,853 lots. Final volumes on Friday totalled 11,676 lots.
Open interest in COMEX copper futures fell 981 lots to 69,537 contracts by August 31. Frank McGhee, head precious metals trader with Integrated Brokerage Services LLC in Chicago, said slowing economic growth and a deteriorating US housing market would continue to hold the red metal's upside in check. He also pointed to the fact that China will likely have less ability to sustain its growth, citing a general slowdown in its exports of the red metal.
"When you had the US market stumbling, but still had the rest of the world growing, China could afford to gobble up everything and continue to move forward, but at the end of the day they have to be able to sell it some place," McGhee said. Those slowdown fears were heightened by slightly bearish US economic data that showed manufacturing expansion slow in August and construction spending unexpectedly fall in July. The Institute for Supply Management said its index of national factory activity eased to 52.9 last month, its lowest since March and down from 53.8 in July.
Within the ISM data, the new orders index fell to 55.3 from 57.5, while prices paid declined to 63.0 from 65.0, providing some evidence that softer growth is putting a damper on inflation. US construction spending fell 0.4 percent in July, its largest drop since January, the Commerce Department said. Michael Metz, chief investment strategist with Oppenheimer & Co in New York, believed the construction spending figure to be a "distinct disappointment."
Meanwhile, in trade data released after the close on Friday, speculators in US copper futures cut their net short position to 6,537 lots, compared with a previous short of 7,067 lots. Open interest fell to 73,083 lots from 76,498, data from the Commodity Futures Trading Commission showed.