Copper Prices Under Pressure

Copper prices are going to remain under downward pressure as housing markets in the United States and China are slowing down, causing copper demand to shrink some.

Companies like Freeport-Mcmoran (NYSE:FCX) will be under pressure as well, as those with heavy copper exposure won't have anything to celebrate for some time to come, as there's nothing to suggest new housing starts in the U.S. will start to rise any time soon, as the tax credit has now ended.

And the Chinese property market is being cooled off in order to battle a potential bubble in the urban areas of the country, making copper demand there slower than expected not too long ago.

So for now, copper prices should fall, or at best, remain level, as there's nothing to indicate demand will rise in the near term.

New Housing Starts Crash After Government Props Removed

Confirming the housing starts have been largely a result of the tax credit which expired in May, new homes being built plummeted by 10 percent in the month, showing the reality of the weakness of the housing market.

Compared to a year ago, that's just under an 18 percent drop in new housing starts, which in May 2009 increased by 7.8 percent.

New housing starts in April were also downwardly revised, falling from the previous data where it was said there was a 5.8 percent increase, down to 3.9 percent new housing starts for the month.

With the first-time buyer tax credit now gone, housing starts should continue to plunge, as there's nothing there to create the demand brought on by the government initiative.

It adds to the concern of copper demand and prices, as China is decreasing its demand for copper to battle inflation in their property markets.