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BASE METALS: Copper Down On Dollar, Car Sales Temper Losses
Aug 3,2011 08:57CST
industry news
Source:SMM
Copper futures closed slightly lower Tuesday as modest gains in July U.S. car sales tempered downward pressure from a stronger dollar.

Aug 02, 2011 (Dow Jones Commodities News via Comtex) -- --Comex September copper settled down 1.50c, or 0.3%, at $4.3950/lb

--Stronger dollar keeps dollar-denominated copper under pressure

--Modestly higher July U.S. car sales temper downward pressure

By Tatyana Shumsky
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Copper futures closed slightly lower Tuesday as modest gains in July U.S. car sales tempered downward pressure from a stronger dollar.

The most actively traded contract, for September delivery, fell 1.50 cents, or 0.3%, to settle at $4.3950 a pound on the Comex division of the New York Mercantile Exchange.

Thinly traded August-delivery copper was down 1.50 cents, or 0.3%, at $4.3890 a pound.

Car companies reported a mild uptick in domestic new-vehicle sales for July, giving copper futures a boost. Traders closely watch the reports for clues about copper demand because the metal is widely used in manufacturing vehicles, from electrical wiring in the control panel to copper tubing to transfer liquids.

General Motors Co. (GM) said July new-car sales grew 8% from the same month last year, while Ford Motor Co. (F) reported a 9% increase.

Ford, the only member of Detroit's Big Three auto makers that didn't file for bankruptcy protection in 2009, has recaptured the No. 2 position in domestic sales behind GM.

Meanwhile, Chrysler Group LLC's U.S. sales grew 20% in July from last year, though operating off a much smaller base than GM and Ford.

Copper futures struggled to pare losses on the news, as a recent spate of weak economic news continues to weigh on trader sentiment.

"Auto sales may be going in one direction, but it's offset by other, downbeat economic news," said Daniel Pavilonis, senior market strategist with MF Global.

A stronger dollar kept copper prices under pressure. The dollar marched higher against a basket of foreign currencies amid growing relief that the U.S. will lift the national borrowing limit in time to avoid a government default.

The U.S. Senate approved the bill to raise the debt ceiling earlier Tuesday afternoon and President Barack Obama quickly signed it into law.

"We've managed to safely kick the can down the road a little bit," said Sterling Smith, analyst with Country Hedging.

The ICE Dollar Index was recently at 74.525, up from 74.329 late Monday in New York.

Copper futures are denominated in dollars and demand for such contracts tends to shrink when the dollar rallies as they appear more expensive to investors using foreign currencies.

The labor strike at the world's largest copper mine, Escondida in northern Chile, is in its 12th day Tuesday as the union awaits a fresh offer from the company. The mine is operated by BHP Billiton Ltd. (BHP, BHP.AU), which owns a 57.5% stake, while Rio Tinto PLC (RIO, RIO.LN) holds 30% and a Japanese consortium led by Mitsubishi Corp. (MSBHY, 8058.TO) holds the remaining 12.5%.

The company recently invoked the force majeure clause for its copper concentrate shipments, freeing it from its contract obligations due to unforeseen and uncontrollable events.

Escondida is losing around 3,000 metric tons of copper a day due to the strike. The mine accounted for about 7% of global copper output last year.

Copper settlements (ranges include electronic and pit trading):
Aug $4.3890; down 1.50 cents; Range $4.3785-$4.4110
Sep $4.3950; down 1.50 cents; Range $4.3730-$4.4250

 

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