Copper Price Declines Ahead of China Manufacturing Data

on May 31, 2013

Copper fell on Friday, May 31 as investors closed positions ahead of a key factory activity report from the world’s top metals consumer. The commodities market has been nervous about China’s official

Purchasing Managers’ Index (PMI), due out on Saturday, which according to a *Reuters* poll, is likely to show that the Asian country’s manufacturing activity has barely expanded this month. Many investors have also not been taking chances after an initial private-sector PMI survey last week showed a contraction for the first time in seven months, fuelling a sell-off in commodities and equities.

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“I don’t think anyone is too excited about going into the weekend particularly long,” said analyst George Adcock at broker Marex Spectron in London, as quoted by *Reuters*. He added that most investors remain neutral prior to China’s PMI release, awaiting the market’s reaction to the news.
Three-month copper on the London Metal Exchange (LME) slid 0.8 percent to $7,264 a tonne by 09:51 GMT on Friday, erasing the previous day’s gains. On the COMEX, copper for delivery in July was also down 0.56 percent. But news of a fresh tunnel collapse on at the world’s second-largest copper mine, in Indonesia, spurred supply concerns among traders and helped lift the copper price later in the global session.

Despite the Friday decline, copper is still on track to end May higher, following a three-month slide. The industrial metal’s price has recently rebounded from the year’s lows hit in April, advancing nearly three percent on supply outages and improved demand in China.
**Codelco’s Q1 Output Up But Profit Falls**
Although the copper price has been gaining ground recently, a downwards trend remains a concern for most producers. Industry news showed on Thursday a fresh sign of accelerating supply and decreasing profitability in the copper business.

Chilean state-owned mining company Codelco, the world’s largest copper producer, has posted its quarterly performance results. According to the report, the miner’s own copper output rose 3.3 percent to about 385,000 tonnes in the first three months of the year from 373,000 tonnes in the same period a year ago. The increase in its own production was due to great copper output at its Chuquicamata, El Teniente and Radomiro Tomic mines. Including Codelco’s slice of El Abra and Anglo American’s Los Bronces, the company’s first-quarter output jumped roughly 9.4 percent.

The group’s Chief Executive Officer Ivan Arriagada told reporters on Thursday that the company expected record production this year, boosted by its new slice of the coveted Los Bronces deposit and the launch of its Ministro Hales mine.
!m[Codelco’s Q1 Output Up But Profit Falls](/uploads/story/2665/thumbs/pic_1_inline.jpg)
However, a Chile-wide port strike and declining copper prices have resulted in a profit fall. Arriagada announced that earnings before tax and extraordinary items slumped 43 percent year-on-year to $867 million in the first quarter of 2013. Looking ahead, the executive said that the company, which produces roughly 11 percent of the world’s copper, remains optimistic about long-term prices.
“We’ll continue to see volatility in the near term and there could be a small copper-market surplus at the end of the year which will introduce further volatility… but prices are not going to plummet anytime soon,” Arriagada stated on Thursday.


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