METALS-Copper hits 3-1/2 month low, China data reinforces demand angst


Pratima Desai

* Fund selling takes copper to September lows
* Premium for cash over three-month aluminium contracts

(Updates with official prices, comment)
By Pratima Desai
LONDON, Jan 2 (Reuters) – Copper prices hit 3-1/2 month lows on Wednesday as worries about economic and demand growth in top
consumer China were reinforced by manufacturing data showing shrinkage.
Benchmark copper on the London Metal Exchange traded down 1.7 percent at $5,861 a tonne in official rings from an earlier $5,856 a tonne, its lowest since Sept. 18. Prices of the metal used in power and construction fell 18 percent 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,” a copper trader said. “Fund selling after Europe opened pushed copper to September lows.”

CHINA: 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 around 24 million tonnes this year.
TRADE: One major reason behind slowing growth is the U.S.-China trade dispute. Last month the two countries agreed a 90-day ceasefire to allow time for fresh talks to try and end a
dispute that has seen them impose increasingly severe tariffs on
each others’ goods.
POLICY: “While (China) authorities are loosening policy, we only expect the economy to stabilise by mid-year, which will be a factor weighing on all commodity prices but particularly the
industrial metals”, Capital Economics said in a note.
RUSAL: The LME confirmed on Monday it would lift the suspension on aluminium produced by Russia’s Rusal if
U.S. sanctions are lifted, saying a consultation with users had not raised any objections to the plan.
ALUMINIUM: Aluminium was flat at $1,846 a tonne. It touched $1,830 on Monday, the lowest since February last year, on worries about oversupply despite Chinese producers’ plans to
cut capacity.
SPREADS: Worries about a tight LME aluminium market due to low stocks and one company holding between 50 and 79 percent of warrants has created a premium for the cash over the three-month contract CMAL0-3 currently around $14 a tonne. It touched $16 on Monday, its highest since July last year.
STOCKS: The premium has attracted some aluminium to the LME system, but stocks at 1.27 million tonnes are still 10 percent below those seen last April and a fraction of global demand estimated at around 67 million tonnes this year. MALSTX-TOTAL
PRICES: Zinc fell 2.9 percent to $2,395, lead lost 1.9 percent to $1,982, tin was little
changed at $19,470 and nickel slipped 1.5 percent to
$10,525 a tonne.

(Reporting by Pratima Desai; editing by Louise Heavens)

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