LONDON: Copper prices slumped on Wednesday amid uncertainty about demand in top metals consumer China and ahead of interest rate decisions by the US central bank and others.
Three-month copper on the London Metal Exchange (LME) fell 1.5% to $9,081 a tonne by 1700 GMT, having gained 11% over the past month.
US Comex copper futures dropped 2.3% to $4.13 per lb.
“Domestic activity in China is picking up quite strongly, but it’s the international demand for Chinese goods that may be holding back manufacturing activity,” said Nitesh Shah, commodity strategist at WisdomTree.
China’s factory activity shrank more slowly in January than the previous month, with data on Wednesday showing the Caixin/S&P Global manufacturing purchasing managers’ index came in weaker than expected.
Copper extended losses after softer than forecast data showed that US manufacturing contracted further in January as higher interest rates stifled demand for goods.
Physical demand in China was muted because producers held sufficient stocks built up before the Lunar New Year holidays and consumption from end users remained weak amid a slowdown in orders from both domestic and overseas markets, participants said.
“There will be more activity next week when more traders and buyers come back,” one Chinese trader said.
The US Federal Reserve is widely expected to raise interest rates by 25 basis points at the conclusion of its two-day policy meeting later in the day. Investors will closely monitor comments from Fed Chair Jerome Powell.
“If central banks maintain their quite hawkish tilt, then that could be a reason for the dollar to continue to strengthen and that could weigh on base metals prices,” WisdomTree’s Shah said.
The market appeared to ignore news that the huge Chinese-owned Las Bambas copper mine in Peru was set to halt production on Wednesday because of continued road blockades.
Among other metals, LME aluminium shed 0.8% to $2,622 a tonne, nickel slid 3.8% to $29,195, zinc dropped 1.5% to $3,337 and tin lost 2% to $28,895 while lead was little changed at $2,137.
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