Copper futures steadied on Monday as investors sifted through manufacturing data from China.
Copper traders were treated to two assessments of China’s factory activity over the weekend. China’s official manufacturing purchasing managers’ index (PMI) fell to 50.8 in October from 51.1 in September and slightly lower than forecasted.
Meanwhile, the HSBC China Manufacturing PMI, a private gauge of nationwide factory activity, ticked up slightly to 50.4 in October, from 50.2 in September.
While both gauges point to slowing growth, the readings remained above 50, the line separating expansion from contraction. “As long as they’re growing, there will still be demand for industrial metals,” said Adam Klopfenstein, a senior market strategist with Archer Financial Services LLC in Chicago.
“Any weakness out of China starts to raise question marks about what sort of stimulus is likely to come through from there,” said Nic Brown, head of commodities research at Natixis.
“If you look at some of the subcomponents, like exports, and you sum it all up – not good,” said analyst Dominic Schnider at UBS Wealth Management in Singapore. “I think we are going to test the lows we have seen in October,” he added.
A cooling property market in China and softened export demand are also factoring into the price of copper. Plus, the long anticipated increase in supply has started to filter into the Chinese market. “Supply has definitely increased as we expected,” states Li Chunlan, an analyst at CRU in Beijing. “Smelters are trying to produce as much as possible to hit their annual production targets.”
Chunlan says she expects demand to be okay in November thanks to power grid spending and the seasonal swing from white good manufacturers. “Prices may recover later in November, as there is expectation of more supportive policies from government for real estate,” she adds.
Investors are keeping an eye on labor talks at several copper mines. A month-long strike was avoided last week at a mine in Indonesia, but workers at Peru’s largest copper mine plan to walk off the job next Monday and start an open-ended strike.
Three-month copper on the London Metal Exchange (LME) sits at $6,720 a ton. That is up 0.37 percent. Overall, copper posted a 4.5 percent drop in October, its biggest monthly fall since March.Tagged with tED