By Tatyana Shumsky
Copper prices hovered near unchanged on Wednesday as gains in
Chinese equities soothed worries about the economic health of the
world's top copper buyer, while potential cuts to global copper
production calmed concerns about a glut of the metal.
The most actively traded contract, for September delivery, was
recently trading 0.1% lower at $2.4005 a pound on the Comex
division of the New York Mercantile Exchange.
Copper prices hit six-year lows in July as investors fled the
market on fears an economic slowdown in China will sap demand for
the industrial metal. China accounts for about 40% of global copper
demand, with much of the metal used in manufacturing and
construction. But slowing business activity and steep declines in
the country's stock market have fanned concerns over a potential
slackening in raw-materials demand. Some investors worry that
reduced purchases by China won't be offset by higher demand from
other countries, leading to a global supply glut of copper.
"When you have the largest consumer of copper in the world going
through an economic downturn and a liquidity crunch, those fears
are going to weigh on copper demand forecasts and that's the
pressure we've seen on copper for the last several weeks," said
Dave Meger, director of metals trading with High Ridge Futures in
Chicago.
On Wednesday, Chinese stocks closed higher and snapped a
three-day losing streak that wiped 11% off the value of the
Shanghai Composite Index after officials ramped up efforts to
soothe markets.
In response, some copper traders who had wagered on further
price declines returned to the market as buyers to close out their
bearish bets, Mr. Meger said.
Elsewhere, Chile-based Antofagasta PLC (ANFGY, ANTO.LN) cut its
2015 copper output forecast by 4.3k% to 665,000 metric tons. The
company cited lower copper ore grades and recoveries at its Los
Pelambres mine and delays to first production from its Antucoya
project.
The move comes a day after Freeport McMoRan Inc. (FCX), the
largest U.S.-listed copper producer, said it would reduce capital
spending and consider reducing copper and molybdenum output as part
of a comprehensive review of its business.
"Given the 18% decline in copper prices since the start of the
year, and noting that this is the fourth consecutive year of
declining copper prices, the announcement by Freeport should elicit
a sigh of relief," said Jessica Fung, metals analyst at BMO
Capital, in a note to clients.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com
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