Copper prices slip on China's gloomy factory activity data

1st April 2022 By: Reuters

Copper prices dropped on Friday as demand worries rose after data showed factory activity in top metals consumer China slumped last month at the fastest pace in two years, with a firm US dollar also weighing on sentiment.

Other base metals also fell as investors were cautious ahead of a key US jobs report later in the day that could cement the potential for a 50 basis-point Federal Reserve interest rate hike next month.

Three-month copper on the London Metal Exchange was down 1.2% at $10 256/t, as of 07:07 GMT, after two days of gains.

The most-traded May copper contract on the Shanghai Futures Exchange ended daytime trade 0.5% lower at 73 160 yuan ($11 514.55) a tonne, after ending March with its eighth straight quarterly gain.

Manufacturing conditions in China deteriorated in March amid the Ukraine crisis and resurgence in domestic coronavirus cases that hit both external and domestic demand, mirroring the overall situation in Asia. 

"The ongoing presence of Covid-19 despite vaccinations is expected to continue to impact both the supply and demand side of the equation for base metals this year, with countries that practise zero tolerance, such as China, most at risk," said Natalie Scott-Gray, senior analyst at broker StoneX.

DOLLAR: The dollar extended a rebound versus major peers on Friday ahead of the US jobs data. A strong dollar currency makes greenback-denominated metals more expensive to users of other currencies. 

CHINA: China's financial hub Shanghai was on Friday set to expand Covid-19 curbs to include the western half of the city and extend restrictions in the east where people have already been forced to stay home since Monday. 

LME PRICES: Aluminium slipped 0.1% to $3 486/t, zinc rose 0.2% to $4 182, lead gained 0.1% to $2 419, and tin shed 0.8% to $42 550. Nickel CMNI3 was virtually flat at $32 105.

SHANGHAI PRICES: Aluminium fell 0.7%, while zinc was also nearly flat, but nickel slumped 1.5%, lead dropped 0.4%, and tin shed 0.9%.