Red metal sheds gains

Prices drop as economic data hints at weak demand

Copper prices ended lower at Comex on Tuesday, 03 August 2010. Prices fell due to weaker than expected set of economic data that hit the wires at Wall Street today. A day earlier, on copper had closed at the highest level in three months.



At USA, copper futures for September delivery ended lower by 3 cents (0.9%) at $3.36 a pound on Tuesday. For the month of July, copper ended higher by 12% as concerns about a slowdown in the global recovery abated, pushing the red metal to its best month since April 2009.

Before this, for second quarter, copper dropped 16%. Copper gained about 6% for the first quarter, buoyed by data from the U.S. and other countries reinforced expectations that the global economic recovery was on track. On a year to date basis, in 2010, copper is higher by 1.9%.

On Tuesday, at LME, copper for delivery in three months ended lower by $85 (1.1%) at $7,425. Prices had crossed the $8,000 mark for first time since 2008 on 6 April. On 3 July, 2008, prices had touched an all time intra day high of $8,940. Copper ended FY 2009 higher by 140%.

Among economic data expected for the day, the Commerce Department in US reported on Tuesday, 03 August 2010 that the savings rate among U.S. households rose to the highest level in a year in June as income and spending were flat. Income was unchanged in June, failing to show growth for the first month since July 2009. Consumer spending was also flat. Personal savings rate rose to 6.4% in June, the highest level in a year. The June report was slightly weaker than expected and included downward revisions to figures from April and May. Market had been looking for June income to rise by 0.2%, with spending pegged to increase 0.1%.

In a separate report, the Commerce Department in US reported on Tuesday, 03 August 2010 that factory orders decreased 1.2% in June 2010. It was much lower than market expectation of a decrease of 0.5%. Orders for durable goods fell 1.2% in June, revised down from 1.0% estimated a week ago. Orders for nondurable goods fell 1.3% in June. Orders fell a revised 1.8% in May, down from the prior estimate of a 1.4% drop.

Also, the pending sales index of existing U.S. homes fell 2.6% to 75.7 in June, partly reflecting the end of a federal tax credit for first-time buyers of up to $8,000. The pending sales index totaled 77.7 in May and 110.9 in April, when buyers sought to take advantage of the tax credit. The index's current level is 18.6% below June 2009, when it stood at 93.

The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%. Copper fell for three months in a row through June on concern about efforts to curb growth in China, the world's biggest user of the metal.

Copper ended substantially higher last year on expectations of revived global economic growth along with a decline in the dollar. The dollar index had dropped almost 4.2% last year. The metal was also pushed higher by record first-half imports to China, the world's largest user.

At the MCX, copper prices for August delivery ended lower by Rs 3.2 (0.92%) at Rs 340.95/Kg. Prices rose to a high of Rs 344.25/Kg and fell to a low of Rs 340.3/Kg.