February 1, 2016 / 10:45 AM / 4 years ago

METALS-Copper slides, spooked by weak China manufacturing data

* Weak yuan may be reason behind high Chinese copper imports
    * China's government hasn't decided on plan to stockpile tin
    * Norilsk's higher nickel production in focus

 (Adds closing prices)
    By Pratima Desai
    LONDON, Feb 1 (Reuters) - Copper slipped on Monday alongside
Chinese equities on news the country's manufacturing sector
shrank at the fastest in more than three years, reinforcing
fears of weaker demand in the top consumer of industrial metals.
    Benchmark copper on the London Metal Exchange ended
down $4,560 a tonne from $4,561 at the close on Friday. The
metal used in power and construction earlier touched a session
low of $4,496.50.
    China's official Purchasing Managers' Index (PMI) fell to
49.4 in January from 49.7 in December. It is the weakest reading
since August 2012 and marks the sixth consecutive month of
contraction. 
    The Shanghai Composite Index eased 1.8 percent,
while the CSI300 index of the largest listed companies
in Shanghai and Shenzhen lost 1.5 percent. 
    "After the Chinese PMI data it's not surprising to see
copper and other industrial metals and China equities under
pressure," said Commerzbank analyst Eugen Weinberg.
    "The market is very much driven by sentiment at the moment,
but we are likely to see more supply cuts this year, many mines
are operating at unprofitable levels."
    Weinberg also sees as a positive China's imports of refined
copper surging 34.4 percent in December from a year ago to a
record 423,181 tonnes. 
    But others doubt demand is stronger and instead suggest
fears of further yuan devaluations have convinced Chinese
consumers and traders to stockpile the metal.
    A weaker yuan makes commodities priced in dollars
more expensive for local Chinese firms. 
    China's week-long Lunar New Year holiday which starts on
Feb. 8 is expected to subdue activity in metals markets.
    Industrial metals also came under pressure after data from
the Institute for Supply Management said its index of U.S.
factory activity showed a fourth straight month of contraction,
traders said. 
    Three-month aluminium was untraded at the close, but
bid up at $1,521, zinc traded up 1.5 percent to $1,648
and lead gained 0.8 percent to $1,732 a tonne.
    Tin was down 0.5 percent at $14,800 a tonne. 
    The soldering metal is expected to come under further
pressure after China's largest tin producer, Yunnan Tin
, said the government had not yet decided on a plan
to stockpile tin. 
    Nickel fell 2.3 percent to $8,460 a tonne. 
    Traders said Russia's Norilsk Nickel producing more of the
stainless steel ingredient was weighing on prices. 
    "During times of commodity price weakness it is typical that
mining companies increase production in order to lower unit
costs," Investec analysts said in a note.
    "Such behaviour serves to exacerbate the oversupply, thus
delaying any recovery in metal prices. We are now in the "dog
eat dog" phase where only fittest will survive."
    PRICES    
    Three month LME copper          
    Most active ShFE copper         
    Three month LME aluminium       
    Most active ShFE aluminium      
    Three month LME zinc            
    Most active ShFE zinc           
    Three month LME lead            
    Most active ShFE lead           
    Three month LME nickel          
    Most active ShFE nickel          
    Three month LME tin             
    Most active ShFE tin                    

 (Additional reporting by Melanie Burton; Editing by Jan Harvey
and David Evans)
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