LONDON—Base metals slid to multiyear lows in London on Monday, as a sharp decline in Chinese equities, and growing concerns about the country’s economic health, triggered a broad-based commodities rout.
The London Metal Exchange’s three-month copper contract was down 2.3% at $4,936.50 a metric ton in midmorning European trade, having tumbled to its lowest level since 2009 earlier in trading at $4,903 a ton. It fell below the key $5,000 level for the fifth session in a row.
The Shanghai Composite Index declined more than 8% at the start of the week, bringing its losses since a mid-June peak to about 37%.
“Base metals are deeply in the red, amid a commodity selloff as Chinese equities tumbled overnight,” said Dee Perera, a base metals analyst at Marex Spectron.
Aluminum also hit a six-year low during trading at $1,521 a ton, while zinc hit a five-year low at $1,709 a ton and lead hit a five-year low at $1,635 a ton.
Concerns about China have reignited recently, following the devaluation of the yuan two weeks ago and the release of a string of underwhelming economic data. China consumes over 45% of the supply of major base metals, and as a result, metal prices tend to follow its economic trajectory closely. When it is seen to be in trouble, market participants anticipate demand declines and price falls.
Investors remain cautious about the outlook for the base metals, given a series of multiyear lows in the past month and the continued bad news coming out of Chinese markets.
However, some analysts view the price falls as exaggerated given what they say is continued Chinese buying of metals.
“In our opinion, the latest price slump is driven not so much by fundamentals as by speculation,” said Commerzbank in a note.
Commerzbank quoted the example of Chinese imports of refined copper, which, in July, climbed by 2% month-on-month and 6% year-over-year to 260,000 metric tons.
The “world-wide copper market thus remains tight,” the bank said.
Among the other base metals, aluminum was down 1.4% at $1,526 a ton, zinc was down 2.3% at $1,726 a ton, nickel was down 6.4% at $9,550 a ton, lead was down 3.1% at $1,649 a ton and tin was down 2.8% at $14,490 a ton.
