Copper prices fell to a two-week low on Thursday after shrinking factory activity in top consumer China and worsening euro zone purchasing managers indexes (PMIs) raised concerns about the outlook for demand. Benchmark copper on the London Metal Exchange (LME) ended down 1.95 percent at $8,290 a tonne, from Wednesday's close of $8,455 a tonne.
The metal, used in power and construction, earlier fell to its lowest since March 7 at $8,262.50 a tonne, dropping below its 200-day moving average. Other metals hit multi-month lows, with nickel sinking to a three-month low, lead to a two-and-a-half month low, and aluminium and zinc sliding to one-month lows.
China's manufacturing sector activity shrank in March with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index - the earliest indicator of China's industrial activity - showed on Thursday. "It's not that China is not growing (but) it's going to grow at a lower rate than people were expecting," said Citi analyst David Wilson.
"There's some bright spots - the US is doing well, but the US consumes 1.8 million tonnes (of copper) compared to (China's) 8 million, so China has a bigger impact. I suspect there's scope for downside to the mid-February lows before we see some consumer buying." The market was also rattled by euro zone purchasing managers index surveys that revealed unexpected declines in manufacturing and services activity in March, largely due to a sharp fall in French and German factory activity. Copper has risen around 9 percent this year, as investors weigh the prospects of a brighter outlook for the US economy against a slowdown in demand from China, which accounts for 40 percent of global consumption.
Chinese trade data this week showed copper imports in February remained strong, in part as the metal is used as collateral for cheaper funding, but this may lead to lower imports ahead, Macquarie said in a research note. "(We) expect that due to sufficient copper availability on the ground in China, we will see net imports of copper decline in March," Macquarie said in a research note.
Copper stocks in LME-registered warehouses fell to their lowest since early November 2008, down 2,875 tonnes to 255,450 tonnes, with the ratio of cancelled warrants - material earmarked for delivery - to total stock at 31.84 percent. In other metals traded, aluminium ended down 1.92 percent at $2,167 a tonne, from Wednesday's close of $2,209.50, having earlier hit its lowest since mid-February at $2,151.
Tin closed down 3.87 percent at $22,110 from $23,000, having earlier hit a two-week low at $22,110. Lead ended down 2.89 percent at $1,985 a tonne from Wednesday's close of $2,044, having earlier hit its lowest since mid-January at $1,979.25, while nickel closed down 1.89 percent at $18,450 from $18,805 a tonne, having earlier hit its lowest since late December at $18,266. Zinc ended down 1.73 percent at $1,985 a tonne from Wednesday's close of $2,020, having earlier hit a one-month low of $1,978.