Copper Prices Fall as China's Manufacturing Sector Continues to Struggle
NEW YORK, NY -- (Marketwire) -- 09/24/12 -- Copper futures last week saw their biggest decline in seven weeks after manufacturing data and trade disputes with Japan raised concerns over future demand. Demand from China, responsible for roughly 40 percent of the world's copper consumption, is expected to increase by 4.2 percent in 2012, below previous estimates of a 5 percent gain according to China International Capital Corp. The Paragon Report examines investing opportunities in the Copper Industry and provides equity research on Southern Copper Corp. (NYSE: SCCO) and Thompson Creek Metals Company Inc. (NYSE: TC) (TSX: TCM).
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The HSBC Flash China manufacturing purchasing managers' index preliminary reading of 47.8 in September signaled an 11th month of contraction. China's gross domestic product has contracted for six consecutive quarters. The country's GDP in the second quarter expanded 7.6 percent, which was the smallest growth in three years. Copper prices have gained roughly 13 percent since early August on announcements of stimulus measures from central banks in Europe and the U.S.
"China's manufacturing sector continues to struggle, weighed down by a significant domestic slowdown, a wholly unsupportive external climate and a completely insufficient policy response," said Alistair Thornton of IHS Global Insight. "The government has underestimated the pace of the slowdown and is behind the curve."
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Southern Copper is one of the largest integrated copper producers in the world. The company produces copper, molybdenum, zinc, lead, coal and silver. All of their mining, smelting and refining facilities are located in Peru and Mexico. The company produced 313,500 tons of copper during the first six months of the year.
Thompson Creek is in the process of constructing the Mt. Milligan copper-gold mine in central British Columbia. The start-up is expected to be in the third quarter of 2013 and commencement of commercial production of copper and gold is expected in the fourth quarter of 2013.
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