Copper Slides to Six-Year Low on China Growth Fears

Reuters

Copper prices hit six-year lows on Monday as manufacturing data from top consumer China and a slide in Shanghai equities reinforced concerns about its economic growth prospects.

Three-month copper on the London Metal Exchange tumbled 1.7 percent to $5,142 a tonne, its lowest since July 2009. The metal used in power and construction traded at $5,187 in official rings from $5,230 at Friday's close.

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"The really poor Chinese manufacturing data would be the primary concern for metals," said Sergey Raevskiy, metals research analyst at SP Angel.

"There hasn't been any stabilization of Chinese stocks, despite all the efforts by the government."

July manufacturing activity in China fell at its fastest pace in two years, dashing hopes the economy may be stabilizing.

The final Caixin/Markit China PMI dropped to 47.8 in July from June's 49.4.

The data also reinforced negative sentiment on Chinese equity markets, where the Shanghai Composite Index lost one percent.

Traders also cited concern about the ripple effect of slowing activity in China on other Asian economies.

"There is no incentive to stop copper falling below $5,000, it's going to break soon," one trader said. "The Caixin suggests serious weakness in China's private and smaller companies."

Three-month aluminum also touched a six-year low at $1,601.50 a tonne, a drop of more than 20 percent since early May. The metal used in transport and packaging traded at $1,605 in the rings from $1,618 on Friday.

Aluminum is under pressure from a globally oversupplied market due to Chinese exports.

"(Chinese) manufacturing remains in a severe slump, meaning that base metals should remain on the defensive," INTL FCStone said in a note.

"Moreover we see no meaningful reduction in base metals supply with aluminum output up over the last year. While Chilean copper production will also exceed 2014 levels."

Zinc fell to $1,882.50, its lowest since Dec 2013 and traded at $1,893 from $1,916. Lead slid to a five-year low at $1,672 and traded at $1,689 from $1,702.

Tin was lower at $15,950 from $16,300.

Nickel slipped to a one-month low of $10,660. It was untraded in the rings, but bid at $10,790 from $11,045 at Friday's close.

Stocks in LME approved warehouses, at 458,838 tonnes, accounting for about three months of global consumption and weak demand from Chinese stainless steel mills are major headwinds for nickel prices.