LONDON: Copper prices slid on Thursday as further shrinkage in China’s manufacturing sector highlighted poor demand prospects while a stronger dollar reinforced negative sentiment.

Benchmark copper on the London Metal Exchange (LME) was down 0.6% at $8,425 a metric ton at 1706 GMT. Prices of the metal used extensively in the power and construction industries are on course for their first monthly decline since May.

China’s official purchasing managers’ index (PMI) showed manufacturing contracting for a fifth month running in August, maintaining pressure on Beijing to step up policy support for the economy.

“China letting its economy drift lower has taken a lot of zip out of the market,” said Liberum analyst Tom Price. “Copper is very sensitive to perceived changes in expectations of US interest rates and China stimulus.”

The US Federal Reserve’s interest rate decisions typically determine the direction of the US currency, a strengthening of which makes dollar-priced metals more expensive for holders of other currencies, potentially subduing demand.

Also weighing on copper prices are stocks in LME-approved warehouses at 102,900 tons, up 90% since July 12 and the highest since October last year.

Elsewhere, aluminium prices hit $2,229 a ton, the highest in more than three weeks, on expectations of robust demand from top consumer China, where stocks of the metal used in the transport, packaging and construction are low.

It was last up 0.4% at $2,211 a ton.

Aluminium inventories in warehouses monitored by the Shanghai Futures Exchange have dropped nearly 70% to 98,114 tons since the middle of March and are at their lowest since late June.

China’s aluminium imports jumped 20.1% in July from a year earlier to 231,452 tons while imports for the first seven months of the year have climbed 12.2% from the same period in 2022 to 1.43 million tons.