Metals sag as global manufacturing slows

LONDON — Prices of copper and aluminum fell sharply on Tuesday as weak manufacturing data, coronavirus disease 2019 (COVID-19) outbreaks in China and rising interest rates stoked fears that demand for metals will soften.

Benchmark copper on the London Metal Exchange (LME) was down 3.4% at $9,435 a ton at 1624 GMT. LME aluminum was down 4.2% at $2,925.50 a ton.

Both metals rallied during 2020 and 2021 and reached record highs in March, when Russia’s invasion of Ukraine raised supply fears.

Copper is now down around 13% from its high of $10,845 and its lowest since December. The price of aluminium has fallen more than 25% from its peak of $4,073.50 and is its lowest since January.

“Sentiment has become gloomier,” said Commerzbank analyst Daniel Briesemann, pointing to slowing factory activity, COVID lockdowns in China and the war in Ukraine, which is pushing up energy prices and hurting industry.

FACTORIES: Manufacturing activity contracted in China, grew at its slowest pace in more than 1-1/2 years in the United States and stalled in the euro zone in April, data showed.

COVID: Beijing embarked on another round of mass testing to control a nascent COVID outbreak. Shanghai has spent more than a month under lockdown.

CHINA GROWTH: Lockdowns have worsened the economic outlook for China, the biggest metals consumer. Fitch cut its China GDP growth forecast for 2022 to 4.3% from 4.8%.

FED: Investors expect the Fed to raise rates by 50 basis points at the end of a two-day meeting on Wednesday, its biggest rate hike since 2000.

DOLLAR: Rising interest rates have helped boost the dollar to a 20-year high against a basket of major peers, making metals costlier for buyers with other currencies.

SURPLUS: The global copper market is set for surpluses of 142,000 tons this year and 352,000 tons in 2023, the International Copper Study Group (ICSG) said.

POSITIONING: Speculators have abandoned their sizable net long positions in copper, according to brokers Marex and data from the COMEX exchange.

OTHER METALS: LME zinc was down 4.9% at $3,905 a ton, nickel fell 3.1% to $30,795, and lead was down 0.7% at $2,245. Tin was up 0.3% at $40,395. —