Copper hits 3-1/2-month low on China data angst

LONDON — Copper prices hit three-and-a-half-month lows on Wednesday as worries about economic and demand growth in top consumer China were reinforced by manufacturing data.

Benchmark copper on the London Metal Exchange (LME) ended 2.1% down at $5,842 a ton, having touched its lowest since Sept. 11 at $5,831. Prices of the metal used in power and construction fell 18% last year.

China’s factory activity contracted for the first time in 19 months in December as domestic and export orders weakened further, a private survey showed.

“Chinese manufacturing data confirmed the trend of a slowdown and is weighing on metals,” one copper trader said. “Fund selling after Europe opened pushed copper to September lows.”

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for December fell to 49.7 from 50.2 in November, marking the first contraction since May 2017. Manufacturing is a key source of jobs in China’s economy. China accounts for half of global copper consumption estimated at about 24 million tons this year.

One major reason behind slowing growth is the US-China trade dispute. Last month the two countries agreed a 90-day ceasefire to try to end a dispute in which the two nations have imposed increasingly severe tariffs on each others’ goods.

“While (China) authorities are loosening policy, we only expect the economy to stabilize by midyear, which will be a factor weighing on all commodity prices but particularly the industrial metals,” Capital Economics said in a note.

The LME confirmed on Monday that it would lift the suspension on aluminum produced by Russia’s Rusal if US sanctions are lifted, saying that a consultation with users had not raised any objections to the plan.

The aluminum price closed 2.7% down at $1,797 a ton after hitting a one-year low at $1,786 on concern about oversupply despite Chinese producers’ plans to cut capacity.

Worries about a tight LME aluminum market because of low stocks and one company holding 50-79% of warrants has created a premium for the cash contract over the three-month contract of about $9 a ton. It touched $16 on Monday, the highest level since July.

Zinc fell 2.4% to $2,409; lead lost 3.3% to $1,955; tin was little changed at $19,480; and nickel gained 1.7% to $10,870 a ton. —