LONDON - Copper prices fell on Monday as expectations of weakening demand were reinforced by manufacturing data from around the world and rising inventories in warehouses approved by the London Metal Exchange (LME).
Benchmark copper was down 0.4% at $7,533 a tonne at 1431 GMT in subdued trade owing to a week-long holiday in top consumer China. Last week the benchmark three-month contract hit 7,220 a tonne, its lowest since July 21.
"It's clear we will have lower demand and potentially lower prices into the latter part of this year," said Bank of America analyst Michael Widmer.
"The uncertainty is how hard the slowdown will be and what the full impact on industrial metals demand will be."
Chinese factory activity contracted at a sharper pace in September as strict COVID lockdowns disrupted production and hit demand for Chinese goods.
Manufacturing activity across the euro zone and Asia weakened in September in the face of continuing cost pressures.
"The European winter will be another key inflection point," said Edward Meir, analyst at ED&F Man Capital Markets.
"However, we think that things in Europe - barring a harsh winter - will not be as dire as expected given that an impressive measure of energy planning and preparation (and conservation) has taken place."
Data showing U.S. manufacturing expanded at its slowest pace since May 2020 raised the prospect of less aggressive rate hikes in the United States, which weakened the dollar and helped industrial metals recover some early losses.
A lower U.S. currency, making dollar-priced commodities cheaper for holders of other currencies, could boost demand.
Copper stocks in LME warehouses are up more than 30% since September at 135,750 tonnes while cancelled warrants - metal earmarked for delivery - dropped to 6% from 50% on Aug. 26.
A $120-a-tonne premium for cash copper over the three-month contract compared with a discount in August reflects market participants squaring short positions, traders said.
In other metals, aluminium was up 2.3% at $2,212 a tonne, zinc lost 1.9% to $2,911, lead fell 1.1% to $1,887, tin slid 2.3% to $20,170 and nickel was up 0.5% at $21,205.
(Reporting by Pratima Desai, Editing by David Goodman and David Evans)