Wednesday, 05 August 2015 13:15
MELBOURNE: London copper slipped back on Wednesday towards six-year lows as the dollar rose on heightened expectations the US Federal Reserve could raise interest rates in September and amid a bearish backdrop for China demand.
Atlanta Federal Reserve President Dennis Lockhart said it would take “significant deterioration” in the US economy for him to not support a rate hike in September, lifting the dollar, and eroding purchasing power for buyers with other currencies.
Commodities demand growth is already suffering from slowing factory growth in China as its switch to a service-led economy blunts manufacturing demand and threatens to pin back economic growth to the weakest pace in a quarter of a century.
“Sentiment here among Chinese investors is quite bearish at the moment, it’s hard to see any sustainable rebound from here,” said analyst Judy Zhu of Standard Chartered in Shanghai.
“The economic picture still looks quite soft, while manufacturers’ order books have not improved, especially since it’s the slow summer season.”
Three-month copper on the London Metal Exchange slipped by 0.6 percent to $ 5,200 a tonne by 0717 GMT, after closing little changed in the previous session, but within reach of Monday’s six year lows at $ 5,142 a tonne.
Shanghai Futures Exchange copper erased early gains to end less than a half-percent higher at 38,120 yuan ($ 6,140) a tonne.
China’s central bank promised to “stabilise financial market expectations” on Tuesday, saying it will head off risks in the latest show of official resolve to keep the economy on an even keel.
Chilean state copper company Codelco said important mine equipment at its newest project Ministro Hales had been seriously damaged by striking contract workers who seized control of the site this week, potentially affecting output.
New orders for US factory goods rebounded strongly in June on robust demand for transportation equipment and other goods, a hopeful sign for the struggling manufacturing sector.
In other metals, resilience in LME nickel prices may not prove sustained as consumers stay away, said broker Triland in a report.
“There is nothing to suggest any greater upward correction is around the corner just yet… Physical trade and the scrap sector are noticeable for their absence from the market at present.”
