Jul 29, 2011 (Dow Jones Commodities News via Comtex) -- --U.S. House postpones vote on debt ceiling Thursday, talks continue.
--U.S. growth falls short of expectations in 2Q; 1Q growth revised lower.
--No sign of resolution to labor strike at top copper mine Escondida.
By Matt Day
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Copper futures slumped Friday after a report showed the economy of the world's second largest copper consumer grew at a slower-than-expected pace in the second quarter, and as talks to raise the U.S. debt ceiling continued.
The most actively traded contract, for September delivery, was recently down 3.90 cents, or 0.9%, at $4.4305 a pound on the Comex division of the New York Mercantile Exchange.
The U.S. economy expanded at a rate of 1.3% during the second quarter, the Commerce Department said Friday, short of economists' expectations for a rise of 1.8%. The first quarter figure was revised sharply lower, to a 0.4% rate, from the previous estimate of a 1.9% rise.
Copper is sensitive to the growth outlook because of its widespread use in manufacturing and construction.
The industrial metal also came under pressure as negotiations to lift the U.S. borrowing limit remained stalled Friday, with Republicans in the House of Representatives and Democrats in the Senate seemingly poised to pursue competing deficit-reduction plans. House Speaker John Boehner late Thursday delayed a scheduled vote on the Republican plan to allow more time to shore up support for the bill.
Even as the Treasury Department's Tuesday deadline to raise the debt limit approaches, the copper market hasn't been severely shaken by concerns over a potential downgrade or default, and futures Thursday ended just short of three-month highs. But market participants say futures have come under some pressure as investors take a cautious stance toward commodities and other perceived risky assets.
"With the clock ticking, it is not certain at all that (a reconciliation of the competing debt plans) will even take place, which is why most markets are lower today," MF Global analyst Edward Meir said in a note.
Copper's losses were cushioned as the labor strike at the world's largest copper mine continued Friday. BHP Billiton Ltd. (BHP, BHP.AU), majority owner of the Escondida mine in Chile, declared force majeure on its copper shipments Wednesday, allowing the mine to suspend contracts with customers because of events outside its control.
Members of the mine workers' union started striking July 21 to protest what they said was a failure to meet the terms of their contract. BHP has said the strike is illegal, and declined an offer by the regional government to mediate talks with the union.
The mine stands to lose about 3,000 tons of production for every day workers are striking. The copper market has been supported in recent months by the view that mine production growth would fail to keep up with rising demand this year. A series of production shortfalls in recent months have kept a floor under copper prices despite worries about the threat to the global economy posed by U.S. and European sovereign debt.