Copper prices fell on Wednesday on a stronger dollar and as weak manufacturing data, particularly from top consumer China, highlighted poor demand prospects. Benchmark copper on the London Metal Exchange closed down 1.1 percent at $4,867 a tonne. A higher US currency makes dollar-denominated commodities more expensive for non-US firms.
The Caixin/Markit survey of purchasing managers in China's manufacturing sector fell to 49.4 last month from 49.7 in March, the 14th consecutive month of shrinkage. "The Chinese PMI were disappointing. It's a case of wait and see what the broader Chinese economic data brings," said VTB analyst Wiktor Bielski. "It all goes back to China." Base metals markets are waiting to see if industrial production, investment, loans and property market data for April confirms the pick up seen in March.
China accounts for nearly half of global copper consumption estimated at around 22 million tonnes this year. Global manufacturing growth almost stalled last month as rising prices halted an upturn in new orders, a survey showed. "Headline PMIs eased nearly everywhere in April. Most disappointing is China's Caixin survey, which had nearly breached the surface in March, but then took another dive. Japan, too, stumbled," HSBC said in a note.
"Also note Taiwan's slide, an economy highly sensitive to the global industrial cycle as well as the Chinese economy. Korea, by contrast, came up for air, but barely. In the West, things look softer as well." Three-month aluminium closed little changed at $1,633.50 a tonne from Tuesday's $1,634 a tonne. However it gained about 10 percent in April and is trading near its highest since July last year.
Higher prices are partly due to a decision in December by Chinese smelters to shut capacity, a move that was followed by plans by six smelters to form a joint venture to possibly stockpile up to 1 million tonnes of the metal. "Aluminium prices have risen too much, too fast. It's going to pull in more supply," INTL FCStone analyst Edward Meir said. "This year should be a year of transition, we need to see more supply leave the market, companies to shut down smelters or merge them, not open new ones. But none of this is happening right now." Zinc fell 0.5 percent to $1,888, lead slipped 0.1 percent to $1,763, tin rose 0.7 percent to $17,400 and nickel lost 0.8 percent to $9,445.
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