LONDON - Prices of copper and aluminium fell to three-month lows on Tuesday as weak manufacturing data, Covid-19 outbreaks in China and rising interest rates stoked fears that demand will soften.

Benchmark copper on the London Metal Exchange (LME) was down 2.5% at $9 525.50 a tonne at 10:55 GMT. LME aluminium was also down 2.5% at $2 975 a tonne.

Both metals rallied during 2020 and 2021 and reached record highs in March, when Russia's invasion of Ukraine raised supply fears.

Copper is now down around 12% from its high of $10 845 and aluminium has fallen around 25% from its peak of $4 073.50.

"Sentiment has become gloomier," said Commerzbank analyst Daniel Briesemann, pointing to slowing factory activity, Covid lockdowns and the war in Ukraine, which is pushing up energy prices and hurting industry.

FACTORIES: Manufacturing activity contracted in China, grew at its slowest pace in more than one-and-a-half years in the United States and stalled in the euro zone in April, data showed. 

COVID: Beijing embarked on another round of mass testing to control a nascent Covid outbreak. Shanghai has spent more than a month under lockdown. Read full story

CHINA GROWTH: Lockdowns have worsened the economic outlook for China, the biggest metals consumer. Fitch cut its China GDP growth forecast for 2022 to 4.3% from 4.8%. 

FED: Investors expect the Fed to raise rates by 50 basis points at the end of a two-day meeting on Wednesday, its biggest rate hike since 2000. Read full story

DOLLAR: Rising interest rates have helped boost the dollar to a 20-year high against a basket of major peers, making metals costlier for buyers with other currencies.

SURPLUS: The global copper market is set for surpluses of 142 000 t this year and 352 000 t in 2023, the International Copper Study Group (ICSG) said. 

POSITIONING: Speculators have abandoned their sizable net long positions in copper, according to brokers Marex and data from the COMEX exchange.

OTHER METALS: LME zinc was down 2.1% at $4 019 a tonne, nickel fell 1.6% to $31 255, lead rose 0.5% to $2 271.50 and tin was up 0.5% at $40 440.