* China manufacturing activity at seasonal low
* Potential for economic activity to catch up (Adds closing prices)
LONDON, Jan 30 (Reuters) - Copper prices sank to five-month lows on Thursday as funds sold on expectations of slowing demand in top consumer China, where a coronavirus outbreak has raised the prospect of an economic slowdown.
Benchmark copper on the London Metal Exchange (LME) closed 1% lower at $5,587.5 a tonne.
Prices of the metal widely considered a gauge of economic health had dropped as low as $5,565.50, its weakest since early September and down 12% since Jan. 16.
“Economic activity in China is suffering, though in terms of manufacturing and construction activity we are at a seasonally low point,” said Julius Baer analyst Carsten Menke.
Menke said he still expects copper to average $6,150 in the third quarter.
“Typically, when we have this sort of short-term shock, there’s catch-up potential for economic activity once the situation normalises.”
VIRUS: China’s National Health Commission said the total number of deaths from the coronavirus in China climbed to 170 by late Wednesday while the number of those infected rose to 7,711.
The epidemic could slow Chinese growth to 5% or even lower, a government economist said, as authorities extended Lunar New Year holidays and urged staff to stay home.
China accounts for about half of global consumption of industrial metals.
“If we see further travel restrictions, or if the World Health Organization does determine the coronavirus a global health emergency, this could further hit sentiment,” ING analysts said in a note.
“While the degree of damage to the economy and to metals demand remains unknown, clearly the short-term picture has darkened.”
“However, current low prices should attract some consumer hedging, particularly for those metals that have a more bullish narrative when it comes to fundamentals.”
STOCKS: Copper prices are expected to be sustained by low stocks in LME warehouses MCUSTX-TOTAL, which at 182,550 tonnes are down more than 45% since the end of August.
“A finely balanced market this year should support copper, but so much depends on how long it takes to get the virus under control,” one copper trader said.
A recent Reuters survey showed analysts on average expect a 160,000 tonne deficit this year in the copper market , estimated at about 24 million tonnes.
TECHNICALS: Support for copper is seen at $5,518, the low on Sept. 3. The first upside barrier is around $5,935, where the 200 and 100-day moving averages are converging
OTHER METALS: Aluminium was down 0.3% at $1,731, zinc lost 1% to $2,188, lead slipped 0.4% to $1,825, tin ceded 1.1% to $16,025 and nickel gained 0.6% to $12,620 a tonne. (Reporting by Pratima Desai Editing by David Goodman and Elaine Hardcastle)
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