Copper and aluminum slumped to six-year lows as mounting concern about the health of China’s economy sparked a broad selloff in commodities.
Metals declined as Chinese equities fell by the most since 2007 amid concern that the government will be unable to reverse the country’s economic slowdown. Price declines weighed on commodity producers, with the Bloomberg World Mining Index losing as much as 7.5 percent.
Chinese manufacturing fell to the lowest in more than six years, data last week showed. That followed weaker-than-expected reports on investment, industrial output, retail sales and exports in July. The nation consumes about 40 percent of the world’s copper and half its aluminum.
“When the largest buyer of copper and everything is having economic problems, you can expect demand to fall off,” Michael Smith, the president of T&K Futures and Options Inc. in Port St. Lucie, Florida, said in a telephone interview. “The market is in liquidation mode.”
Copper for delivery in three months dropped 2.1 percent to settle at $4,951 ($2.25 a pound) at 5:51 p.m. on the London Metal Exchange, after touching $4,855, the lowest since July 2009. Prices slipped for the seventh time in eight days and are down 21 percent this year.
On the Comex in New York, copper futures for December delivery lost 2.2 percent to $2.248 a pound.
All six main contracts traded on the London Metal Exchange declined, with nickel falling as much as 9.7 percent. Commodities dropped to a 16-year low as Brent crude slid below $45 a barrel for the first time since 2009, and stocks in Germany headed for a bear market.
“Market positioning is very, very bearish and points toward an expected severe deterioration in demand, particularly with regards to China,” Carsten Menke, a commodities research analyst at Julius Baer Group Ltd. in Zurich, said by phone. “Financial markets are really questioning whether the Chinese government has everything under control.”
Mining company shares tumbled, and the intraday drop for the Bloomberg World Mining Index was the biggest in almost four years. Glencore Plc, Aluminum Corp. of China Ltd. and KGHM Polska Miedz SA all plunged.
Vancouver-based Teck Resources Ltd., a copper producer, dropped 5.8 percent to C$7.82 at 2:30 p.m. in Toronto after earlier tumbling as much as 15 percent.
“The only thing producers can really do in a declining commodity market like this is to cut costs and evaluate whether their capital projects still add value,” David Wang, a Chicago-based analyst with Morningstar Investment Services Inc., said Monday by telephone.