Copper hit a six-year low on Friday and zinc touched its weakest in two years, as a stronger dollar and gloomy sentiment about global growth and oversupply continued to weigh on the market. The dollar index jumped to the highest level in over three months after improving US payrolls data bolstered the case for a US rate rise in September.
A firmer dollar hits commodities prices in the US currency by making them more expensive for buyers using other currencies. While the main focus of investors has been the health of the economy in top metals consumer China, weak economic data released on Friday about European powerhouse Germany also added to the pressure on prices. German exports fell by more than expected in June and industrial output also declined in Europe's largest economy.
Rises in copper inventories on the London Metal Exchange and Shanghai Exchange on Friday highlighted concern about an expected surplus on global markets. Further weakness in the currencies of countries where metals are produced has also been a factor depressing markets, lowering costs for miners and allowing them to accept weaker prices. "Definitely the weakness from producer currencies, from South Africa to Australia, in part may explain the price movement," said Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt. Three month copper on the London Metal Exchange slid to $5,121 a tonne, the weakest since July 2009, before recovering losses to $5,168 by 1400 GMT, a loss of 0.3 percent. Copper has given up 1.2 percent this week.
"There are concerns over Chinese manufacturing PMI, the numbers that we are seeing obviously haven't been that good and the big issue is the market actually feels that Chinese data is actually worse," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance. LME zinc dropped to $1,846 a tonne, the lowest since August 2013, before recovering to $1,859, down 0.4 percent.
"The negative sentiment has been weighing on prices for weeks and months but the recent stabilisation of the equity markets in China should help sentiment to improve," Weinberg added. China's CSI300 index ended the week up 2.4 percent, its biggest weekly gain since July 10. Weinberg said Chinese trade data due over the weekend may also support the market, showing Chinese metals demand is not as dire as some believe. Aluminium gained 0.2 percent to $1,595 a tonne after Century Aluminium curtailed capacity at one of its four smelters. The metal used in transport and packaging slid as low as $1,576 on Thursday, its weakest since July 2009, on persistent worries about a glut of oversupply. Lead fell 0.4 percent to $1,698 a tonne, tin slid 1.8 percent to $15,220 a tonne and nickel added 0.2 percent to $10,875.