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Copper Futures Plunge over Tepid Chinese Demand Growth

July 5, 2017 at 16:52 by Andrew Moran

Copper prices are tumbling as sluggish demand growth from China is worrying investors. The industrial metal has also seen an increase in warehouse stocks, but this was offset by the possibility of a strike at two Chilean mines, a move that would affect supplies.

September copper futures fell $0.038, or 1.43%, to $2.65 per pound at 16:35 GMT on Wednesday. The red metal has declined for four consecutive trading sessions, but copper prices are seeing support at the technical moving day average. Year-to-date, copper prices have advanced more than 5%.

The industrial metal’s Wednesday losses were attributed to three major factors.

First, there has been tepid demand growth from China as the nation’s services sector grew at a slower pace last month. This is diminishing China’s economic outlook, the world’s biggest copper buyer.

Second, copper warehouse stockpiles on the London Metals Exchange have spiked by 47% to 213,900 tones over the past week, with the biggest inflows coming from Asian depots. Investors fear that the international copper market may be oversupplied, which could widen the supply and demand gap.

Third, the US dollar strengthened as the greenback climbed 0.09%. A stronger US dollar is bad for commodities like copper because it makes it more expensive for foreign investors to purchase.

Copper’s losses were capped by a potential work stoppage at two Chilean miners. It is being reported that Chilean miner Antofagasta may face a strike by workers and supervisors as contract talks continue. Since the combined annual production at the Chilean mines is estimated to be 160,000 tones of copper, investors were cheering on the reports because it would help ease prices.

Other metals were experiencing a mixed bag midweek. September gold futures rose just $4.00, or 0.33%, to $1,223.40 per ounce. Silver plummeted $0.12, or 0.79%, to $15.96 an ounce.

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