Copper wiped out two weeks of gains as metals and mining shares slumped after data showed manufacturing contracted further in China, the world’s biggest commodities user.
All six main contracts on the London Metal Exchange retreated as the worst-ever start to a year for Chinese stocks triggered a trading halt in more than $7 trillion of equities, futures and options. Most raw materials also fell as tension between Iran and Saudi Arabia cut demand for risk assets. The Bloomberg World Mining Index slid the most in almost four weeks.
The LME’s metal index dropped 24 percent last year, reaching the lowest since 2009, as China’s economic slowdown cut consumption and expanded a glut of material. While two Chinese manufacturing gauges since Friday showed contraction, a measure of services rose to the highest in more than a year, reflecting the country’s transition away from investment and manufacturing toward consumption and services.
"The easiest path is down for metals," Andrew Silver, a broker at Triland Metals Ltd. in London, said by e-mail. "Poor data from China again, manufacturing and the Saudi/Iran issue are hitting the sentiment. Confidence is also being dragged lower by the sell-off in equities."
Copper for delivery in three months dropped as much as 2.3 percent, the most in almost three weeks, and was down 2.1 percent at $4,605 a metric ton by 10:45 a.m. on the LME. Aluminum, lead, nickel and zinc all fell at least 2 percent, while tin lost 0.4 percent.
Copper had ended the year near a six-week high as Chinese producers agreed to cut supplies to curb the surplus. Last year’s rout, the largest since the global financial crisis in 2008, has also prompted some of the world’s biggest miners to reduce output.
The Bloomberg mining gauge slipped as much as 3.1 percent to near the lowest since 2008. Anglo American Plc, last year’s worst performer on the U.K.’s benchmark stock index, slumped 8.5 percent on Monday. Glencore Plc dropped 7 percent and BHP Billiton Ltd. lost 4.2 percent.
“Demand is lacking,” Dominic Schnider, head of commodities and Asia-Pacific foreign exchange for UBS Group AG’s wealth management unit in Hong Kong, said in a Bloomberg TV interview. “Even if you did take down capacity, the problem is on the demand side. As long as we don’t see a big pick-up, the situation is that almost all the metals will remain under pressure, in particular copper.”
