Base Metals Start September Weaker as U.S. Policy and China Demand Worries Weigh on Market

Base metals began September on a downbeat note, with prices slipping on Monday as the market adjusted expectations regarding aggressive policy easing in the U.S., while concerns about demand from China were heightened by recent manufacturing data.

Three-month copper on the London Metal Exchange (LME) dipped by 0.4% to $9,199.50 per metric ton by 0411 GMT. This decline follows a slight gain in August, driven by earlier optimism about a possible rate cut in September.

Similarly, the most-traded October copper contract on the Shanghai Futures Exchange (SHFE) fell 0.5% to 73,620 yuan ($10,364.05) per ton.

Analysts at Guangzhou Futures noted that trading and sentiment are currently heavily influenced by U.S. economic data. Last Friday’s positive spending figures from the world’s largest economy led markets to scale back expectations of a significant rate cut from the Federal Reserve. This strengthened the U.S. dollar, which hovered around a two-week high on Monday, making dollar-priced commodities like metals more expensive for buyers using other currencies and thereby putting pressure on prices.

Key to the Fed's decisions will be the payrolls report due later this week, which is expected to provide further insights into the health of the U.S. economy.

In addition to U.S. economic factors, concerns about demand from China also weighed on the market. While copper stocks have decreased in recent weeks due to lower prices encouraging buying, along with the traditionally stronger autumn season, China's economic outlook remains uncertain.

An official survey revealed that China's manufacturing activity fell to a six-month low in August, as factory gate prices dropped and businesses struggled to secure orders. However, a private sector survey indicated some optimism, showing that manufacturing activity in smaller, export-oriented firms swung back to growth in August due to new orders driving production.

In other LME metals, aluminium shed 0.8% to $2,427.50 per ton, nickel dropped 0.8% to $16,625, zinc fell 1.5% to $2,853.50, tin lost 1.9% to $31,740, while lead edged up 0.1% to $2,055.

On the SHFE, aluminium slipped 0.9% to 19,560 yuan per ton, lead decreased 0.4% to 17,220 yuan, nickel fell sharply by 2.5% to 128,290 yuan, zinc declined 1.3% to 23,720 yuan, and tin lost 2.1% to 257,390 yuan.