Copper prices have hit three-week lows as the market worried about the spread of the coronavirus from China to other countries and the threat it poses to global economic growth and demand for industrial metals.
Benchmark copper on the London Metal Exchange (LME) ended 1 per cent down at $US5,616 a tonne.
Prices of the metal used by investors as a gauge of economic health earlier fell to $US5,574.5, its lowest since February 4 and down more than 10 per cent since the middle of January.
“The fall this week is primarily driven by the coronavirus spreading from China to South Korea and other countries, which triggered selling of risk assets such as industrial metals,” said Wenyu Yao, senior commodities strategist at ING Bank.
VIRUS: Governments on Thursday ramped up measures to battle a looming coronavirus pandemic as the number of new infections outside China for the first time surpassed new cases in the country where the outbreak began.
“There does not seem to be a strong rationale why the coronavirus will not spread globally over the coming weeks, resulting in governments shutting down a substantial share of the world’s economic activity for up to 1-2 months,” Citi analysts said in a note.
“Underlying metals consumption in China, northern Italy, Korea and a number of other regions is being severely impacted.”
STOCKS: Concern about demand was reinforced by large copper deliveries to LME-approved warehouses this week, taking stocks to three-month highs around 220,000 tonnes.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange (ShFE) were near two-year highs at 298,619 tonnes at the end of last week, while Shanghai bonded warehouse stocks were at a six-month high of 330,500 tonnes, data showed.
CHINA: Auto sales in China fell by a more than expected 18.7 per cent in January, marking the industry’s 19th consecutive month of sales decline.
NICKEL: The large discount for the cash contract over three-month nickel was about $US73 a tonne, suggesting ample supply on the LME market.
This can be seen in LME stocks , which have climbed to 229,860 tonnes, having stood at less than 70,000 tonnes in December.
Cancelled warrants – metal earmarked for delivery – have also fallen below 40 per cent, from near 50 per cent in December.
Three-month nickel closed 1.4 per cent down at $US12,375.
OTHER METALS: Aluminium fell to $US1,682.5 a tonne, its lowest since January 2017.
Aluminium closed 0.4 per cent down at $US1,690, zinc fell 1.7 per cent to $US2,012, lead lost 0.5 per cent to $US1,808.5 and tin ceded 2 per cent to $US16,345.