Aluminium has fallen to a near 15-month low, clocking up a five per cent loss on the month, after data showed China’s manufacturing sector grew at its slowest pace since July 2016 and concerns lingered about excess Chinese supply.
Other metals also pulled back, with nickel hitting multi-month lows and zinc and lead dropping to their lowest in weeks.
The slowdown in Chinese factory growth in October coincides with escalating Sino-US trade tensions that have raised fears over growth in the world’s second largest economy and top metals consumer.
The dollar scaled 16-month highs against a currency basket on the back of further strong US economic data, heading for its biggest monthly winning streak in more than three years.
A strong dollar makes dollar-priced metals more expensive for non-US investors.
‘Aluminium’s fundamentals are weaker than other base metals like copper,’ said Sergey Raevskiy, metals analyst at SP Angel.
‘There’s structural oversupply in the Chinese market and the fear of more (tariffs) from the United States is not helpful.’
Three-month aluminium on the London Metal Exchange ended down 0.7 per cent at $US1,953.50, after touching a trough of $US1,953.
Nickel ended down 2.5 per cent at $US11,475, its lowest since mid-December.
Bellwether copper closed down 0.7 per cent at $US5,992.
‘A glance at speculative positioning reveals that there is still further downside potential,’ Commerzbank said in a note.
‘Though speculative net long positions in copper on the LME fell last week, they ultimately remain firmly positive.’
Russia’s Norilsk Nickel, one of the world’s largest nickel producers, said its consolidated nickel production was at 53,739 tonnes in the third quarter of 2018, up nine per cent quarter-on-quarter.
As China’s yuan approaches the seven to the dollar barrier, investors are betting authorities will eventually let the currency fall beyond the historic level, but won’t allow the kind of capitulation seen in past market meltdowns.
Three cities in China’s top steelmaking province of Hebei have issued second-level or ‘orange’ pollution alerts, forcing industrial plants to cut output.
Indian miner Vedanta reported a 34 per cent fall in second-quarter net profit, hit by lower revenue from its zinc operations, rising costs and the shutdown of a smelter in southern India.
LME data showed on-warrant or available lead stocks at their highest since November 2017.
Lead closed down 0.8 per cent at $US1,924, having hit a trough of $US1,886, zinc closed down 2.2 per cent at $US2,493, having hit a trough of $US2,485.50, while tin closed up 0.1 per cent at $US19,100.