Copper prices slid to two-week lows on Tuesday as the spotlight fell on gloomy prospects for economic growth and demand after a batch of weak manufacturing activity data from around the world. Benchmark copper on the London Metal Exchange was untraded at the close, but bid down 1.1% at $5,886 a tonne. The price of the metal used widely in power and construction earlier touched $5,881, the lowest since June 18.
"The truce on the trade front between the United States and China yesterday helped copper and base metals, but the deluge of data highlighting manufacturing weakness has damaged confidence," a metals trader said. Copper prices hit six-week highs at $6,075 on Monday after the United States and China agreed to restart trade talks after US President Donald Trump offered concessions including no new tariffs and an easing of restrictions on technology firm Huawei.
"Our long-term assessment about the trade talks has not changed," said INTL FCStone analyst Edward Meir in a note. "We still think that the two sides will ultimately fail to reach a deal given that Washington is demanding fundamental changes to China's economy that Beijing will not agree to, namely reducing or eliminating state subsidies and downsizing government-sponsored SOEs (state owned enterprises).
Chinese manufacturers account for about half of global consumption of base metals, while the United States accounts for nearly 10%. Demand for industrial metals is highly correlated with industrial activity. China's factory activity unexpectedly shrank in June as domestic and export demand faltered, a private sector business survey showed on Monday, pointing to further strains on its vast manufacturing sector.
Manufacturing activity also shrank in most Asian and European countries in June. US manufacturing activity slowed to near a three-year low in June, the third straight month of declines, with a measure of new orders received by factories tumbling. Adding to the gloom was Germany's VDMA engineering body, which slashed its forecast for 2019 production, blaming the trade conflict between the United States and China, Brexit uncertainty, Italy's budget situation and the risk of an escalation in the Middle East.
Also worrying the market was the US government ratcheting up pressure on Europe in a long-running dispute over aircraft subsidies, threatening tariffs on $4 billion of additional EU goods. The metal used in electronic components ended down 6.3 percent at $17,700 a tonne, up from an earlier $17,585, the lowest since August 2016.
Traders said a lack of liquidity on the LME market and break below of $18,145, the November low, accelerated the sell-off. However, tin industry sources say some producers are losing money at current prices and may have to cut production. Aluminium traded down 0.7% at $1,782 a tonne, zinc gained 0.7% to $2,479, lead fell 0.6% to $1,895 and nickel slid 2.1% to $12,095.