Copper prices fell to their lowest in more than six weeks overnight as the rising coronavirus death toll heightened fears over the outbreak’s potential impact on the Chinese economy.
Other industrial metals also slipped, oil prices fell more than 2 per cent and Chinese shares registered their biggest decline since May while the yuan also suffered as China put two cities at the epicentre of the outbreak on lockdown.
Investors recalled how the Sudden Acute Respiratory Syndrome (SARS) epidemic in 2002-2003, which also started in China, dented economic growth in the world’s biggest consumer of metals and caused a slump in travel.
Benchmark copper on the London Metal Exchange (LME) ended down 2 per cent at $US5,987 a tonne, taking this week’s losses to about 4.5 per cent.
“If the death toll rises and more and more people are caught by the virus, prices will come down much further,” said Commerzbank analyst Daniel Briesemann.
Speculators were liquidating long positions in copper and the price decline was triggering pre-set sell orders, broker Marex Spectron said.
Also weighing on prices is a sharp rise in stocks. On-warrant inventories in LME-registered warehouses rose to 162,875 tonnes from less than 90,000 tonnes last week. Stocks in China have also begun to rise.
Higher inventories barely shifted spreads, however, with LME cash copper’s discount to the three-month contract fairly stable around $US30.
Chinese markets will be closed from Friday to January 31 for the Lunar New Year, reducing liquidity.
China’s central bank kept the interest rate on its targeted medium-term lending facility (TMLF) unchanged, confounding expectations of a cut.
China’s scrap metal imports in 2019 fell 41.5 per cent from the previous year, with the December intake sinking by 75.2 per cent, customs data showed.
Anglo American’s copper output fell 13 per cent in the fourth quarter and Freeport-McMoRan’s slipped 1.7 per cent.
A copper and cobalt refinery in Zambia and copper mine in Namibia are set to halt activity in the next two months, union officials said.
Indonesia’s nickel ore output more than doubled in 2019 to 52.8 million tonnes, an official said.
LME cash lead moved to a $US5 premium over three-month metal from a discount of more than $US20 earlier this month, pointing to tighter nearby supply.
However, the lead market widened its surplus in November, the International Lead and Zinc Study Group said, adding that the market was roughly in balance in November.
LME lead finished down 1 per cent at $US1,967 a tonne, aluminium slipped 0.9 per cent to $US1,795, zinc fell 2.2 per cent to $US2,343, nickel lost 2.1 per cent to $US13,360 and tin closed 2.3 per cent lower at $US17,030.