March 6, 2020 / 1:21 PM / 22 days ago

METALS-Copper, aluminium slump as virus spreads, threatening demand

* Shanghai aluminium hits lowest in 41 months

* ShFE copper inventories climb to four-year high (Updates with closing prices)

By Eric Onstad

LONDON, March 6 (Reuters) - Prices of copper, aluminium and other industrial metals slumped on Friday as the coronavirus outbreak extended outside China, threatening to crimp economic growth and metals consumption.

The number of people infected with coronavirus worldwide surpassed 100,000 on Friday as the outbreak reached more countries and the economic damage intensified. Business districts began to empty and stock markets tumbled.

“I just wonder whether the metals market is able to fully price in the worst impacts in terms of the economy if we are slowing sharply globally and there’s the risk of recession,” said independent metals consultant Robin Bhar.

“China might recover well, but what about the U.S., Europe, other parts of Asia, which could still be further impacted by the virus? There’s a real threat that we have to see further lows before any sort of recovery can be seen.”

Benchmark copper on the London Metal Exchange shed 1.2% in final open-outcry activity to $5,607 a tonne. Prices of the metal widely used in power and construction have shed 11% since mid-January.

The most active aluminium contract on the Shanghai Futures Exchange (ShFE) touched its lowest in 41 months, dropping as much as 0.8% to 13,020 yuan ($1,872.14) a tonne.

* CHINA STOCKS: Inventories of metal in China piled up this week, underscoring persistent sluggish demand in the world’s top metals consumer amid the coronavirus outbreak.

Inventories of copper in ShFE-approved warehouses CU-TX-SGH rose by a hefty 11.1% from the previous week to 345,126 tonnes, the highest since April 2016.

* NICKEL STOCKS: LME inventories of nickel MNISTX-TOTAL climbed to 236,106 tonnes, the highest since September 2018, having more than tripled since early December last year.

* US VIRUS: The death toll from the coronavirus rose to 14 in the United States, and there were 233 cases of the illness.

“If the virus gets a hold in the USA, the economy will slow further, major corporations will be legally obliged to issue profit warnings and potentially trigger another downward spiral,” Malcolm Freeman at Kingdom Markets said in a note.

* CHINA: The virus likely halved China’s growth in the first quarter compared to the previous three months, a more severe impact than thought just three weeks ago, triggering expectations for earlier interest rate cuts, a Reuters poll showed.

* PRICES: LME aluminium slid 2% to close at $1,685 a tonne. Nickel dropped 0.4% to $12,840, zinc eased 1.3% to $1,984, lead advanced 1% to $1,853 and tin gave up 0.9% to $16,875.

* For the top stories in metals and other news, click or ($1 = 6.9465 Chinese yuan) (Reporting by Eric Onstad; Editing by Jan Harvey)

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