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Copper Gains as Inventories Fall to Yearly Lows while Chinese Manufacturing Eases

by on December 17, 2013 3:16 am BST
 

Copper futures rallied as global inventories of this industrial commodity hit the lowest levels in the last year. Inventories, tracked by global exchanges, saw a 24 percent decline just since September. The increase in demand coincides with the improving industrial output in the United States and China, which leads the world in copper consumption. Barclays PLC foresees copper production trailing demand by 79,000 metric tons.

According to data provided by the London Metals Exchange, copper supplies availability for delivery were depleted and at the lowest levels since August 2008.

The depleting copper inventories are expected to strengthen the rise in prices. Manufacturers that need copper will start obtaining the metal through future delivery, and this will support the rally.

However, the recent HSBC Chinese Flash Manufacturing PMI data fell below expectations to 50.5, a three-month low, versus forecasts of 51. Manufacturing output and employment eased. Shaky manufacturing data continues to suggest that China is still expanding but slowly. According to Societe Generale, the tight liquidity enforced by the People’s Bank of China (PBOC) could be playing a role in less than idea expansion.

The Chinese government kept the 2014 growth target the same as the current fiscal year of 7.5 percent. However, economists believe Chinese growth expansion will be between seven and 7.2 percent.

The HSBC flash PMI data precedes China’s official release and includes 80-90 percent of data already collected; and it often preludes the official print.