Sunday, August 7, 2011

Good News for Wire Prices: Copper Falls on Better Outlook for Supply

Copper futures fell 11% last week, as commodity traders cashed in gains. The markets were influenced by concerns about the US debt limit agreement, lower demand from manufacturers and increased copper production from Chile.

First, the debt-lifting and deficit-cutting agreement passed by the House of Representatives last week threatens to weaken the global consumption levels. The agreement increased the US maximum debt limit by $2.1 trillion.

Second, decreasing manufacturing in the United States is lowering demand for raw materials. A government report on manufacturing - the Purchasing Managers Index - decreased by 4.4 percent, signaling a declining demand for industrial metals, including copper.

And third, a strike at one of Chile's largest copper mines, accounting for 3 percent of global production, ended in a labor agreement last week. A strike still continues at Chile’s Escondida mine - the world's largest - which produces about 10 percent of the global supply.

Comex copper futures which began the week at $4.52/lb, closed at $4.12/lb on Friday. Prices continued to fall on global exchanges over the weekend, dropping as low as $4.02/lb on Sunday.

By Peter Coyne /
August 7, 2011